Palm rangebound, but poised for first weekly gain in three weeks

Malaysian palm oil futures fluctuated within a narrow range on Friday, but showed promise for a weekly increase for the first time in three weeks, according to market observers. The January delivery contract for Bursa Malaysia Derivatives Exchange climbed 7 ringgit, or 0.16%, to 4,447 ringgit ($1,091.02) per metric ton by midday. Over the course of the week, the contract had risen by 3.95%.

However, caution prevailed among traders as they awaited fresh price predictions from leading analysts at the Indonesian Palm Oil Conference in Kuala Lumpur. The sentiment was dampened by uncertainty over a potential new service fee announced by Danantara Sumberdaya Indonesia. Market participants were eagerly awaiting further details on how this might affect the palm oil sector.

Palm oil futures mirrored the movements of other major edible oils, with Dalian’s most-active soyoil contract experiencing a 0.31% increase and its palm oil contract rising by 0.95%. In contrast, soyoil prices on the Chicago Board of Trade were up 0.3%.

The fluctuating prices of palm oil are closely linked to those of other edible oils, as it competes for market share in the global vegetable oils industry. The Malaysian ringgit, which is the currency used for trading palm oil, weakened by 0.15% against the US dollar, making the commodity relatively cheaper for buyers who hold foreign currencies.

However, the outlook for oil prices remained mixed, with a second weekly decline anticipated as the US continued its blockade of Iran, reducing the likelihood of renewed, large-scale conflict that could disrupt supplies from the Middle East.

For biodiesel production, a decline in crude oil prices makes palm oil a less appealing option. Technical analyst Wang Tao from Reuters suggested that palm oil may experience a temporary decline towards 4,382 ringgit per metric ton, following its inability to surpass the resistance level of 4,471 ringgit.