12/01/2017 (The Star) - The bullish sentiment on crude palm oil (CPO) is expected to continue in the first quarter of this year, with analysts pegging the commodity’s price at between RM2,500 and RM3,330 per tonne.

As at 5pm yesterday, the benchmark CPO futures for March firmed RM51 to RM3,132 per tonne, reflecting strong buying interest after the release of the Malaysian Palm Oil Board’s (MPOB) lower palm oil stockpile of 1.67 million tonnes vs 2.91 million tonnes at end-2015.

CIMB Research in its latest agribusiness sector report said it expected CPO to trade at RM2,800-RM3,200 per tonne this month.

While most analysts are neutral on the plantation sector this year, many expect the main bullish factors for prices would continue to be the weak ringgit, low stockpiles, lower palm oil output and higher biodiesel mandates in the short term.

CIMB Research has projected that palm oil stocks would fall further to 1.58 million tonnes at end-January as exports and domestic usage exceed output.

Oil palm planters are also expected to report a good set of fourth-quarter 2016 earnings as the higher average selling prices will offset lower output, added the research unit.

Kenanga Research, meanwhile, said CPO is expected to trade at RM2,900 to RM3,330 per tonne in the first quarter of 2017, with an estimated full-year average price of RM2,250 per tonne.

“While the market may temporarily turn negative on a continued increase in monthly stocks, we expect CPO prices to recover on production weakness in January.

“But external factors remain supportive, especially a stronger US dollar, better crude oil prices and sustained soybean oil prices in spite of a production pick-up,” it said in its latest sector update.

However, the research unit warned that weak demand from key markets could continue to be a risk going forward, especially considering the narrowing soybean oil and CPO price gap.

AffinHwang Capital Research in its latest report also highlighted the positive CPO price uptrend, but cautioned on the narrowing premium to soybean oil.

The MPOB said CPO prices strengthened from RM2,885 per tonne in November to RM3,200 per tonne in December. The average CPO price was at RM2,653 per tonne last year compared with RM2,600 in 2015.

“The CPO price has remained above the RM3,200-per-tonne level for the first 10 days of 2017.

“The sizeable increase in CPO prices has narrowed the soybean oil premium over CPO to around US$80 per tonne.

“Furthermore, the price of CPO is now much higher than the price of Brent crude, thereby weakening biodiesel economics,” it said.