Crude palm oil (CPO) prices are expected to remain between RM3,500-RM3,900 in 2023/24
14/12/2022 (New Straits Times), Kuala Lumpur - Crude palm oil (CPO) prices are expected to remain range bound in 2023 as supply improvements will be relatively balanced with a rise in demand, according to RHB Research.
The firm maintained 2023–2024 CPO prices at RM3,500 and RM3,900 per tonne.
"We expect supply to improve further in 2024, while pent-up demand in 2023 may moderate, leading to lower prices," said its analyst Hoe Lee Leng.
While upside risks have moderated of late, there are still supportive factors that should keep prices relatively stable.
These include weather uncertainties, the availability of fertiliser from Russia, growing demand due to discounted CPO prices versus that of soybean oil (SBO), and potential increases in Indonesia's biodiesel mandate.
"Nevertheless, on the negative front, the palm oil-gas oil (POGO) spread has reversed, and discretionary biodiesel is no longer feasible—while the new deforestation-free supply chain law in the European Union (EU) could impact the demand from the EU ahead," added the firm.
While stock/usage ratios are expected to rise for SBO and the ten oilseed composites, they are expected to decline slightly for palm oil, the eight vegetable oils, and the 17 oils and fat composites.
However, RHB noted that all the stock/usage ratios are comfortably above historical averages in 2023, meaning stock levels are no longer in a tight position for 2023.
Malaysia's palm oil output fell 7.3 per cent month-on-month (MoM) in November, while exports rose 0.9 per cent, MoM, leading to stocks declining to 2.29 million tonnes (-5 per cent MoM).
Peak output season is over, and output will likely fall MoM until end-first the quarter of 2023.
"Malaysia has lost out on the usual festive season demand this year due to competition. However, it may still see one month of demand improvement in December, as Indonesia's tax levy has been reinstated.
"We expect stock levels to fall again this month but stay above the two million-tonne mark," it added.
RHB Research maintained its 'Neutral' call on the plantation sector.