KUALA LUMPUR, April 28 (Bernama) -- The slightly tight supply of crudepalm oil (CPO) in 2005 due to weather conditions, will bring forth abullish market for the commodity, said Malaysian Palm Oil Board (MPOB).

Quoting a report from the National Oceanic and Atmospheric Administration(NOAA), it said a light el-Nino weather condition was expected in SouthEast Asia in mid 2005 and if this materialises, it could affect the supplyof CPO.

It said that after an unexpected 13.9 million tonnes of CPO productionlast year, there is also likely to be a slowdown this year, with the CPOproduction projected to increase by only 2.1 percent to 14.2 milliontonnes, MPOB said in its 2004 Review of the Malaysian Oil Palm Industryreleased here Thursday.

Its director general Tan Sri Dr Yusuf Basiron said the projected slowgrowth in domestic production and steady export demand was expected toreduce the impact of a slight recovery in world oils and fats supplysituation and higher local palm oil carry over stocks.

"This is expected to mitigate the pressure on local CPO price this year,"he said in the review.

As for CPO's average domestic price for the year, MPOB said it wasexpected to range from RM1,200 to RM1,400 per tonne which was consideredas still attractive though slightly lower than last year's average priceof RM1,610 per tonne.

The decline was attributed to a downward trend on soybean oil prices andthe less promising global economic situations.

Quoting the Economic Intelligent Unit (EIU), is said the world economicgrowth was set to decelerate from an average of four percent in 2004 tothree percent in 2005.

"The contributing factors are the oil prices, China's economy that isexpected to slowdown, increase in interest rate and the fluctuation in theexchange rate of the main currencies such as US dollar and yen," said MPOBsaid.

However, with the expected marginal increase in CPO production especiallyin Malaysia should be able to sustain the CPO prices, it said.

In 2004, the average CPO price rose by 4.3 percent or RM66 to RM1,610 asagainst RM1,544 the previous year with the highest and lowest CPO monthlyaverage prices recorded in March and December at RM2,000 and RM1,420 pertonne, respectively.

Meanwhile, for palm oil exports, it is expected to increase by 4.2 percentto 13.1 million tonnes from 12.6 million tonnes in 2004 in line withexpected increase in CPO production and competitive palm oil prices thisyear, the board said.

On the 2004 industry overview, Dr Yusuf said the total exports of oil palmproducts constituting palm oil, palm kernel oil, palm kernel cake,oleochemicals and finished products in 2004 increased marginally by 3.1percent or 0.53 million tonnes to 17.35 million tonnes from 16.82 milliontonnes in 2003.

He added the total export value showed an increase of 16 percent toRM30.41 billion compared with RM26.23 billion in 2003, which was due tomixed performance of all the oil palm products.

The total export revenue for all oil palm products also showed an increasecompared to the previous year, with finished products and oleochemicalsregistering the largest increase of 58.4 percent and 30.5 percentrespectively, due to higher palm oil prices, especially during the firstquarter of last year.

China remained as the biggest market for the country's palm oil withexport offtake totalling 2.8 million tonnes in 2004.

-- BERNAMA