Malaysia bourse mulls used cooking oil futures amid biofuel demand

BURSA Malaysia has been considering a launch of futures contract for used cooking oil, amid a growing demand for it as a biofuel feedstock.

The exchange – the main one for the global palm oil market – has shared proposed specifications for the contract with industry participants, sources said.

The futures will be cash-settled, and priced against the FOB Straits assessment for used cooking oil by S&P Global Commodity Insights, indicated a copy of the proposed guidelines seen by Bloomberg.

The bourse plans to offer the US dollar-denominated contract in lots of 25 tonnes.

A spokesperson for Bursa Malaysia said the specifications are intended for industry consultation and changes may still be made, with any contract launch subject to regulatory approval. S&P Global declined to comment.

Used cooking oil serves as a raw material to produce renewable fuels, which governments are increasingly demanding as they seek to curb emissions.

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Waste oil biofuels consumption rose by almost 40 per cent between 2021 and 2023, lobby group Transport & Environment estimated.

Still, suspicions of fake cooking oil from China alarmed the US biofuel industry earlier this year and spurred calls to hike levies on imports from the nation. 

Bursa Malaysia is known for its physically-delivered crude palm oil contract, as South-east Asia produces the bulk of the world’s supply. The exchange also lists futures for commodities including palm olein and tin. BLOOMBERG