Palm oil extends losses on EU rule, weaker soyoil
Published on: Friday, May 24, 2019

NEW DELHI: Crude palm oil (CPO) prices dropped for a second day as the market was pressured by lower soybean oil prices as well as the European Union’s publication of limits on the use of the tropical oil in biofuels that will start next month.

The EU published a regulation setting new criteria for the use of palm oil in biofuels. The rules, which will have a certification system and restrict the types of biofuels from palm oil that may be counted toward the EU renewable-energy goals, will come into force on June 10.

Futures have fallen sharply on the EU news on biofuels, said Anilkumar Bagani, Research Head of Sunvin Group, a Mumbai-based broker and consultant. 

Weaker U.S. soybean oil and Dalian palm oil markets are also weighing on prices, he said, adding that palm futures may drop to around RM1,940.

A decline in prices of palm byproducts such as stearin and glycerine is hurting refining margins for crude palm oil, while biodiesel margins are very tight. 

If CPO prices start to rise, the margins will become negative and demand for these sectors will be adversely impacted, Bagani said.

EU regulation was adopted on March 13 and subject to a two-month scrutiny period, during which neither the European Parliament nor member states voiced objections.

Soybean oil for July on Chicago Board of Trade fell 0.7pc to 27.12c/lb.

Palm oil for Aug. on Bursa Malaysia Derivatives dropped 1.9pc to close at RM2,017 a tonne, after -2pc on Tuesday; market was shut for holiday on Wednesday.

Soybean oil’s premium over palm US$117/ton vs average of US$106 in past year: data compiled by Bloomberg.

CPO’s discount to gasoil US$144 a ton vs average of US$101 in past year: data compiled by Bloomberg. Refined palm oil for Sept. on Dalian Commodity Exchange slipped 1pc to 4,366 yuan a ton.

Soybean oil for September fell 1pc to 5,350 yuan/ton. 


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