MARKET DEVELOPMENT
RM2,500 Price Lid on CPO Futures Expected
RM2,500 Price Lid on CPO Futures Expected
12/09/2013 (The Star) - Crude palm oil (CPO) futures on Bursa Malaysia Derivatives are expected to be capped below the RM2,500-per-tonne mark, as prices continue to be dragged down by high domestic palm oil inventories and production trends in the coming months.
In addition, news of a potential declining demand from India, the world’s top edible oil buyer, could also put a lid on CPO prices, said market analysts.
The third-month benchmark CPO futures contract for November as at 5pm fell RM46 to RM2,353 per tonne, well reflecting investor concerns over increasing palm oil stocks and high production figures released by the Malaysian Palm Oil Board (MPOB) yesterday.
MPOB said the palm oil inventory rose marginally by 0.11% to 1.67 million tonnes in August, while production increased 3.61% to 1.74 million tonnes.
Exports for the same month under review also firmed up by 7.4% to 1.52 million tonnes. Imports, however, shrank 85% to 7,533 tonnes.
A trader told StarBiz that the domestic palm oil stock, which had stayed below the two-million-tonne level since April, would likely start to increase again, given the traditionally high production season in the second half of the year.
The palm oil inventory in August, in fact, was the highest in three months and “some players are expecting stocks to climb further till year-end,” he added.
India, the world’s largest palm oil consumer, has cut demand for the oil as the rupee weakened to record lows, thus increasing costs for refiners in the country.
According to the Solvent Extractors’ Association of India on Aug 14, inbound shipments for crude and refined palm oil had dropped 5.2% to 568,254 tonnes from 599,128 tonnes a year earlier.
Singapore-based Philips Futures Pte Ltd in a report said: “With palm oil in the high production cycle in the second half of the year and weak demand from destination markets, especially India, palm oil prices are likely to lose support.”
Going forward, it added that investors would likely keep a close watch on the ringgit.
In addition, news of a potential declining demand from India, the world’s top edible oil buyer, could also put a lid on CPO prices, said market analysts.
The third-month benchmark CPO futures contract for November as at 5pm fell RM46 to RM2,353 per tonne, well reflecting investor concerns over increasing palm oil stocks and high production figures released by the Malaysian Palm Oil Board (MPOB) yesterday.
MPOB said the palm oil inventory rose marginally by 0.11% to 1.67 million tonnes in August, while production increased 3.61% to 1.74 million tonnes.
Exports for the same month under review also firmed up by 7.4% to 1.52 million tonnes. Imports, however, shrank 85% to 7,533 tonnes.
A trader told StarBiz that the domestic palm oil stock, which had stayed below the two-million-tonne level since April, would likely start to increase again, given the traditionally high production season in the second half of the year.
The palm oil inventory in August, in fact, was the highest in three months and “some players are expecting stocks to climb further till year-end,” he added.
India, the world’s largest palm oil consumer, has cut demand for the oil as the rupee weakened to record lows, thus increasing costs for refiners in the country.
According to the Solvent Extractors’ Association of India on Aug 14, inbound shipments for crude and refined palm oil had dropped 5.2% to 568,254 tonnes from 599,128 tonnes a year earlier.
Singapore-based Philips Futures Pte Ltd in a report said: “With palm oil in the high production cycle in the second half of the year and weak demand from destination markets, especially India, palm oil prices are likely to lose support.”
Going forward, it added that investors would likely keep a close watch on the ringgit.