(July 2): Palm oil edged lower, weighed down by declining crude prices and expectations for strong output from the second-biggest grower, Malaysia.

Futures in Kuala Lumpur dipped 0.2% to trade near RM4,545 per tonne, erasing the previous session’s gain. Crude oil fell for a third day as shipments from the Persian Gulf accelerated, reducing the appeal of biofuels.

“The overriding short-term concern in the market right now is the weakness in the energy market with oil flowing through the Strait of Hormuz,” said David Ng, a senior trader at IcebergX Sdn Bhd. “Expectations of rising output in the coming weeks is also pressuring prices in the near term.”

The palm oil market didn’t see a major reaction to Indonesia’s gradual rollout of its expanded biofuel mandate this week — which means lower exports from the top grower — as it’s factoring in “incremental demand”, he added.

Analysts are expecting robust Malaysian production for June, while at least one cargo surveyor says exports jumped an estimated 12% on the previous month. The increase in overseas shipments was due to rising seasonal demand and restocking activity in major buyers India and China, Ng said.

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