BARRING any unforeseen circumstances, the price of crude palm oil (CPO) is likely to recover and exceed the RM1,600 per tonne mark again by next month compared with its current level of slightly above RM1,500 per tonne, according to Oil World editor-in-chief Thomas Mielke.
Any further problem putting pressure on the already low production level will also see CPO prices bouncing back to RM1,700 per tonne by June, he said,
The price of the CPO futures contract traded on the Malaysia Derivatives Exchange, he noted, had rallied to a four-year high in December but had weakened during the last two months.
We believe that the downward correction is now over and that we will see stabilisation and some recovery later this month, Mielke said.
In Malaysia, production of CPO continued to decline seasonally last month, down by 11% from a month earlier and 1% easier than a year ago. In fact, the price of palm oil has also been on a declining trend in Malaysia and the world market in January and February this year.
This is mainly a reflection of a temporary slowdown in import demand rather than a reflection of a change in the fundamentals, Mielke said at the MDEX Annual Palm and Lauric Oils Conference & Exhibition: Price Outlook 2003/2003 in Kuala Lumpur yesterday.
He noted that the reduction in exports had kept the Malaysian palm oil stock level higher than expected as at the end of last month. However, this had also resulted in a sizeable decline in palm oil stocks in many importing countries.
Mielke expects world palm oil production in the 1st quarter of this year to be seasonally lower at 5.3 million tonnes and about 1 million tonnes lower than estimated world consumption.
This will lead to a substantial decline in world palm oil stocks to a four-year low of 3 million tonnes as at the end of this month against 3.9 million tonnes about three months earlier and 3.4 million tonnes a year ago, he said.
Oil World has estimated that world palm oil production would stagnate at the year-ago level in the first three months of this year compared with year-on-year increases of 0.2 million tonne in the October-December period last year and 400,000 tonnes in July-September last year.
In terms of stock, Mielke said Malaysian palm oil stocks declined to 1.09 million tonnes as at end February this year, down by 200,000 tonnes from a year ago and 400,000 from two years earlier.
For this year, Oil World has forecast Malaysian palm oil production at 12.2 million tonnes.
Meanwhile, United Plantations Bhd vice-chairman Carl Bek-Nielsen said he was bullish on the palm oil price outlook for 2003/2004 over the next three to four months but he expected the bear to appear towards the later part of this year and early 2004.
Indications are that demand will be affected this year by the political and economic instabilities the world is facing today, he said.
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