Global palm oil output to be lower than forecast for 2016

Norway

KUALA LUMPUR: Global palm oil production is expected to be lower in 2016 than forecast due to the El Niño phenomenon, which will affect output.

The Malaysian Palm Oil Council (MPOC) said on Tuesday the worst El Niño in almost two decades curbed output in Malaysia while Indonesia would increase its biodiesel mandate to the 20% blend.

"This would create uncertainties in supplies thus preventing the CPO price from falling below the 2015 levels," it said.

"Prices of palm oil is forecast to be at an average of RM2,590 per tonne and they will not likely fall below RM2,000," it said.

MPOC added the upward trend in CPO prices would continue into 2016 due to lower than expected production of palm oils.

As for crude oil prices, MPOC said they were expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage.

The US Energy Information Administration (EIA) estimated that global oil inventories increased by 1.9 million barrels per day last year, marking the second consecutive year of inventory builds.

"Inventories are forecasted to rise by an additional 700,000 barrels per day this year. OPEC crude oil production is forecasted to increase by 500,000 barrels per day this year with Iran accounting for most of that increase," it said.

The report added global consumption of petroleum and other liquid fuels was expected to grow by 1.4 million barrels in both this year and the next.