KUALA LUMPUR: The global palm oil market is expected to produce a narrow deficit of 100,000 tonnes in 2022 and 2023, the first annual net negative position since 2015/2016, due to an increase in the Indonesian biofuel blending mandate, according to Fitch Solutions.
Nonetheless, Fitch Solutions Country Risk and Industry Research is maintaining its near-term palm oil price forecasts of annual averages of RM3,800 per tonne through 2023, albeit with upside risks, and RM3,400 per tonne through 2024.
“However, we note that risks to our outlook for 2023 are weighted toward the upside at present, palm oil prices having averaged RM3,977 per tonne through the year-to-date,” it said in a report today.
Fitch Solutions anticipated that the higher biofuel blending mandate would see Indonesia’s industrial demand for palm oil rise by almost one-quarter in 2023 compared to 2022, which would, in turn, see total domestic palm oil consumption rise from 17.8 million tonnes to just short of 20.0 million tonnes.
“This is equivalent to an increase of 10.1 per cent year-on-year and thus affect a commensurate fall in Indonesia’s supply of palm oil to the global export market.
“Nevertheless, a factor that will cap further palm oil price increases is the accumulation of edible oil inventories in India, the second-largest consumer and largest importer of edible oils globally,” it explained.
Fitch Solutions said the medium-term evolution of palm oil prices remained unchanged and saw an average price of RM3,000 per tonne in 2025, RM2,600 per tonne in 2026 and RM2,200 per tonne in 2027 alongside a gradual loosening of the global production balance.
On the supply side, it said one factor driving the price reversal had been concern as to the strength of production in Malaysia, the world’s second-largest palm oil producer, where month-ending inventories fell to a five-month low at the January close.
“On the demand side, in the immediate term, bullish sentiment is based upon Chinese demand, following the reopening of its economy post-zero-Covid-19.
“The depreciation of the Malaysian ringgit through February has further supported prices. However, the palm oil market remains uncertain on the strength of demand due to elevated edible oil stocks in India as well as macroeconomic conditions in Pakistan,” it added. – BERNAMA
