KUALA LUMPUR – The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is likely to trade higher next week on low production.
Speaking to Bernama, Singapore-based Palm Oil Analytics owner and co-founder Sathia Varqa said the fundamentals of lower stockpiles and high exports are supportive of higher prices.
He said cargo surveyor Societe Generale de Surveillance reported that Malaysia’s August 1-10 exports were up 4%, defying the lower estimates from Intertek Testing Services and AmSpec Agri Malaysia, which expected a decline of 13% and 10%, respectively.
“Next week, trading will be based on the mid-month August export, which is expected to build on the gains from August 1 to 10,” he said, adding that prices may also fall due to profit taking.
Research firms believe CPO prices will stay higher for some time given the tight supply situation that is likely to remain at least until the end of the third quarter.
MIDF Research in a note said it foresees that the tight inventory level will continue to add an upward pressure on CPO price movements, but prices will soften in the second half.
“We opine that it (reduction in prices) will not be significant in view of unresolved labour shortages due to border closures and slow production growth.”
Palm oil trader David Ng said CPO futures may continue to trade higher, but he cautioned that recent high prices could deter buying interest.
For the week just ended, Malaysian CPO futures finished mostly higher, driven by concerns about weak production and lower stockpiles, which drove up prices yesterday.
On Wednesday, the local CPO futures contract rallied above RM4,500 per tonne for the October benchmark contract – the highest in two months – on lower July palm oil stocks.
According to the Malaysian Palm Oil Board, CPO stocks for July fell 11.85% to 703,886 tonnes from 798,482 tonnes the previous month.
CPO output dropped 5.17% to 1.52 million tonnes against 1.61 million tonnes on-month.
On a Friday-to-Friday basis, August gained RM10 to RM4,530 per tonne, September increased RM190 to RM4,610 per tonne, October added RM237 to RM4,511 per tonne, November improved RM242 to RM4,398 per tonne, December rose RM234 to RM4,309 per tonne, and January 2022 climbed RM220 to RM4,233 per tonne.
Weekly volume fell to 226,304 lots from 295,273 in the previous trading week, while open interest slid to 244,987 contracts versus 249,744.
The physical CPO price for August South went up RM70 to RM4,670 a tonne yesterday. – Bernama, August 14, 2021
