KUALA LUMPUR: The anticipation of tight supply of palm oil will continue to support crude palm oil (CPO) prices of up to RM2,800 a tonne this month, say analysts.
CPO prices have gained more than 19% over the past month to settle at RM2,853 a tonne.
“We expect CPO prices to trade in the range of RM2,400-RM2,800 per tonne in August due to the current tight stock situations and at an average of RM2,300 per tonne for 2020,” CGS-CIMB Securities said.
In a report today, the company said it expects palm oil stocks to fall by 1% month on month to 1.67 million tonnes at end-August.
Against this backdrop, CGS-CIMB expects demand for palm oil for food consumption to improve ahead of the celebration of the mid-autumn festival on Oct 1.
However, this could come at the expense of weaker biodiesel demand, as the rising CPO price has worsened the economic viability of biodiesel, especially the fulfilment of B30 biodiesel in Indonesia.
Meanwhile, Kenanga Research forecast CPO production will decline 1.4% month on month in August to 1.78 million tonnes as trees continue to take a breather.
Concurrently, exports will decline 4.5% to 1.70 million tonnes as pent-up demand gradually fizzles out.
Kenanga Research pointed out that data from cargo surveyors for Aug 1-10 have shown an average decline in exports of 5.5% month on month.
It expects total demand of 1.99 million tonnes to outstrip total supply of 1.84 million tonnes, leading to lower ending stocks of 1.55 million tonnes or down 8.8% month on month in August.
According to the Malaysian Palm Oil Board, Malaysia’s total palm oil stocks fell 10.55% to 1.698 million tonnes in July from 1.898 million tonnes in the previous month. -Bernama
