Palm gains on Indonesia export levy hike, but set for worst week in 9 months

March 18, 2022: Malaysian palm oil futures were set for their biggest weekly drop in nine months, even as prices rose on Friday after top producer Indonesia scraped its exports volume restrictions in favour of a hike in export levy.

The benchmark palm oil contract FCPOc3 for June delivery on the Bursa Malaysia Derivatives Exchange gained 37 ringgit, or 0.62%, to 5,973 ringgit ($1,422.48) in early trade.

Palm has fallen 11% so far this week, set to snap a three-week rally and erasing most of the war risk premium accrued after Russia invaded Ukraine.

FUNDAMENTALS

* Indonesia has significantly raised its maximum palm oil export levy to $375 per tonne when the reference price is at least $1,500 a tonne, as part of efforts to control domestic cooking oil prices after previous measures failed to tackle the problem.

* The world's biggest exporter of the edible oil a day earlier announced a surprised policy U-turn to remove export volume restrictions on palm oil products.

* Oil prices extended their rally at the end of a third volatile week of trade as there was slim progress in peace talks between Russia and Ukraine, raising the spectre of tighter sanctions and a prolonged disruption to oil supply.

* Stronger crude makes palm a more attractive option for biodiesel feedstock.

* Dalian's most-active soyoil contract DBYcv1 rose 1.4%, while its palm oil contract DCPcv1 gained 0.4%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.3%.

* Palm oil may retest a resistance at 6,104 ringgit per tonne, a break above which could lead to a gain to 6,326 ringgit, Reuters technical analyst Wang Tao said. TECH/C

MARKET NEWS

* Stock markets took a breather on Friday after several days of sizeable gains, while commodities were set on edge by the lack of progress in Russia-Ukraine peace negotiations.

Reuters