Malaysian palm oil futures fell slightly on Friday, on track for a second weekly loss, pressured by anticipation of rising output and larger stocks.
The benchmark palm oil contract (FCPOc3) for September delivery on the Bursa Malaysia Derivatives Exchange was down 7 ringgit, or 0.16%, at 4,499 ringgit ($1,106.49) a metric ton by the midday break. The contract has fallen 1.4% so far this week.
Crude palm oil futures are trading lower as market participants weigh a likely rise in output that is expected to contribute to a surge in stocks, while weakness in Dalian palm olein futures is also weighing, said Anilkumar Bagani, commodity research head at Sunvin Group.
Dalian's most-active soyoil contract (DBYcv1) fell 0.2%, while its palm oil contract CME:CPO1! shed 0.95%. The Chicago Board of Trade (BOcv1) is closed for a public holiday.
Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.
A Reuters survey showed that Malaysia's palm oil inventories likely rose in June to their highest level on record for the month, as stronger production outpaced demand growth.
However, anticipated export supply tightness from Indonesia due to its 50% biodiesel blending mandate and talks of a super El Nino this season are cushioning prices from a steeper decline, Bagani added.
Oil prices edged up before a long holiday weekend in the U.S., supported by wary optimism over efforts to secure peace in the Middle East between the U.S. and Iran. O/R
Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.
The ringgit FX_IDC:USDMYR, palm's currency of trade, strengthened 0.29% against the dollar, making the commodity slightly more expensive for buyers holding foreign currencies.
Palm oil may test support at 4,485 ringgit per metric ton; a break below this level could open the way toward 4,440 ringgit, Reuters technical analyst Wang Tao said. TECH/C
($1 = 4.0660 ringgit)