The war-driven rally in Brent crude has largely been erased, putting pressure on palm oil prices. As positive signals for a peace process between the US and Iran pull energy prices down, expectations for biofuel demand have also weakened.
A 0.6% decline in soybean oil prices traded in Chicago further increased selling pressure in the palm oil market. Palm oil production in Malaysia rose 4.8% in the June 1-20 period compared to the previous month. In addition to this increase in production, the appreciation of the Malaysian ringgit raised export costs, limiting external demand.
Market participants say Indonesia's expanded palm-based biodiesel program, expected to be implemented next week, will be decisive for the demand outlook. Meanwhile, the decline in energy prices and rising production are strengthening the downward pressure on palm oil prices.