MARKET DEVELOPMENT
Tight supply and strong orders push CPO price higher
Tight supply and strong orders push CPO price higher
29/5/07 (The Star) - PETALING JAYA: The price of crude palm oil (CPO) continues to trail blaze.
Spot month May South ended RM30 higher at RM2,660 per tonne while CPO June futures jumped RM52 to RM2,672 per tonne.
The July futures added RM52 to RM2,615 and benchmark August futures rose RM37 to RM2,535 per tonne.
A trader said the commodity was fundamentally supported by the tightness in supply and escalating demand, particularly from China, the world's largest palm oil importer.
OilWorld had forecast that China's import of oilseeds, like soya beans, rapeseed, canola and palm oil, was expected to increase “pronouncedly” this year, given the dry weather and less planting, which would result in lower oilseed crops for the country.
The global demand for palm oil is estimated to rise by 13% annually while supply is increasing by only 9% annually.
The trader noted that the current strong local CPO prices also mirrored the good performance in its major rival, soy oil, on the US Chicago Board of Trade.
He said that market players were overly worried over the declining palm oil stocks in Malaysia.
“We expect continued strong buying interest in the next three months,” the dealer said.
The trader cautioned that the CPO price at current high levels was vulnerable to a setback.
If the weather and crop prospects deteriorate in key producing countries such as Malaysia and Indonesia, supplies will be tight causing prices to rise even further.
Malaysia's CPO production in the first five months of this year was expected to be lower than in the last corresponding period.
Indonesia, which is expected to produce 11 million to 11.2 million tonnes annually, will likely produce only 10.5 million tonnes this year.
Malaysia and Indonesia together control 90% of the world's palm oil production.
Spot month May South ended RM30 higher at RM2,660 per tonne while CPO June futures jumped RM52 to RM2,672 per tonne.
The July futures added RM52 to RM2,615 and benchmark August futures rose RM37 to RM2,535 per tonne.
A trader said the commodity was fundamentally supported by the tightness in supply and escalating demand, particularly from China, the world's largest palm oil importer.
OilWorld had forecast that China's import of oilseeds, like soya beans, rapeseed, canola and palm oil, was expected to increase “pronouncedly” this year, given the dry weather and less planting, which would result in lower oilseed crops for the country.
The global demand for palm oil is estimated to rise by 13% annually while supply is increasing by only 9% annually.
The trader noted that the current strong local CPO prices also mirrored the good performance in its major rival, soy oil, on the US Chicago Board of Trade.
He said that market players were overly worried over the declining palm oil stocks in Malaysia.
“We expect continued strong buying interest in the next three months,” the dealer said.
The trader cautioned that the CPO price at current high levels was vulnerable to a setback.
If the weather and crop prospects deteriorate in key producing countries such as Malaysia and Indonesia, supplies will be tight causing prices to rise even further.
Malaysia's CPO production in the first five months of this year was expected to be lower than in the last corresponding period.
Indonesia, which is expected to produce 11 million to 11.2 million tonnes annually, will likely produce only 10.5 million tonnes this year.
Malaysia and Indonesia together control 90% of the world's palm oil production.