KUALA LUMPUR: The local crude palm oil (CPO) futures market is expected to trend higher this week driven by low production concerns.
Mumbai-based Sunvin Group commodity research head Anilkumar Bagani told Bernama that the market is concerned about whether palm oil production in both Malaysia and Indonesia could be negative on a year-on-year basis as strong El Nino phenomenon indications persist.
He said Refinitiv Commodities Research expects wet weather to pick up in the short-term for Indonesia/Malaysia palm oil
regions, but returning dryness into mid-May could elevate downside risks.
“Seven-day rainfall totals were 20-40mm, drier than normal over Malaysia along with most of Sumatra in the west and Sulawesi in the east across Indonesia.
“While the central regions of the country received near normal rainfall,” he said.
As a result, Anilkumar said worsening long-term dryness is becoming a concern for Malaysia, while Indonesia’s palm oil is still faring better to this point in time on soil moisture.
Meanwhile, he said palm oil prices are under pressure due to sell-off in the Chicago Board of Trade (CBOT) soy oil futures and easing rapeseed oil and sunflower oil prices in the global markets.
“The palm oils premium over soft oils is the biggest deal breaker right now as the flexible demand is unsurprisingly moving to the lucrative more premium soft oils,” Anilkumar noted.
For the week just ended, CPO futures were traded weaker, tracking the lower local stocks level due to higher consumption, as well as the CBOT soybean oil futures.
There were also profit-taking activities ahead of the long holiday weekend.
On a weekly basis, May 2023 contract month increased by RM26 to RM3,937 per tonne, but June 2023 decreased by RM162 to RM3,540 per tonne and July 2023 declined by RM228 to RM3,338 per tonne.
The August 2023 contract month shed RM218 to RM3,285 per tonne, September 2023 went down RM185 to RM3,295 per tonne and October 2023 slipped RM317 to RM3,302 per tonne.
Total weekly volume rose to 328,902 lots from 275,374 lots, while open interest was higher at 211,155 contracts from 206,956 contracts on Thursday of the previous week.
The physical CPO price for May South stood at RM4,150 per tonne. – BERNAMA
