Palm rebounds on likely new Indonesia biodiesel blend rule

Malaysian palm oil futures climbed on Friday to end the week higher, buoyed by hopes that demand in Indonesia will rise due to a potential new biodiesel rule next year, while traders awaited industry data for further direction.

The benchmark palm oil contract FCPO1! for February delivery on the Bursa Malaysia Derivatives Exchange rose 1.12% to close at 3,987 ringgit ($905.93), after shedding 3.33% in the previous two sessions. It gained 0.89% for the week.

The market was supported by expectations around Indonesia likely implementing a programme to use biodiesel with a 35% blend of palm oil-based fuel, up from 30%, in January, a trader in Kuala Lumpur said.

Some traders were, however, worried about the smaller-than-expected blend. Market participants had expected a 40% blend, the level Indonesian authorities were testing on vehicles.

Focus was also on the U.S. Department of Agriculture data due later in the day and the Malaysian Palm Oil Board data next week for further direction, the trader in Kuala Lumpur said.

Dalian's palm oil contract (DCPv1) was down 0.77%, while its most active soyoil contract (DBYv1) dropped 0.24%. Soyoil prices on the Chicago Board of Trade (BOc2) rose 0.28% in the afternoon Asia hours.

Palm oil is affected by price movements in related oils, as they compete for a share in the global vegetable oils market.

Meanwhile, the share of palm oil in biodiesel and in food in the European Union is expected to fall significantly within the next 10 years, leading to a sharp drop in imports, the European Commission said on Thursday.

($1 = 4.4010 ringgit)