KUALA LUMPUR: Palm oil futures fell for a second day from the highest level in a decade on worries about delays in biodiesel programmes in top growers Indonesia and Malaysia, although a tight supply outlook capped losses.

Prices in Kuala Lumpur climbed as much as 0.7% before dropping 0.8%, and then traded at 3,792 ringgit a ton by the midday break.

The world’s most-used cooking oil rallied to the highest since 2011 earlier this week and is set for its biggest weekly advance since mid-November.

“Palm’s bullish sentiment may be temporarily paused on news that Malaysia will delay its 20% blending mandate, and Indonesia may defer its 40% blending, ” said Rajesh Modi, a trader at Sprint Exim Pte in Singapore.

Still, futures are underpinned by a weaker Malaysian ringgit, Modi said. The market is still riding on a tight supply outlook over the next two to three months and worries over dryness hurting soy crops in South America, he said.

Malaysia will delay the full implementation of its B20 biodiesel mandate -- which entails a 20% blend of palm-biofuel into fossil fuel -- in the transport sector to 2022 as it prioritizes economic recovery, according to Plantation Industries and Commodities Ministry Secretary-General Ravi Muthayah.

The Indonesian Palm Oil Association said the pandemic had delayed biodiesel-related logistics and the B40 biodiesel plan was still undergoing lab tests.

Still, palm’s short-term supply and demand outlook remains extremely bullish, which may lead to “explosive prices moves” until March, according to veteran analyst Dorab Mistry at a closely watched industry conference this week.

Thomas Mielke, executive director of Hamburg-based Oil World, said palm oil will remain bullish until February-March, and that any selling or downward adjustment in prices will only be short-lived. - Bloomberg