Bulls lift palm oil prices higher as production, stockpiles drop

KUALA LUMPUR: Crude palm oil (CPO) futures prices (CPO) on Bursa Derivatives jumped more than 5% as volatility surged, with a survey showing Malaysia’s stockpiles slumping to their smallest since June 2017.

A rally in petroleum and soybean oil boosted sentiment.

Inventories in the second-biggest grower probably fell 11% from a month earlier to 1.78 million tons, according to a Bloomberg survey.

That would be a fourth monthly decline and a 40% drop from January 2019. Output fell 6.8% to 1.24 million tons, the weakest since March 2016, the survey showed.

Ivy Ng, CIMB’s regional head of agribusiness research, predicted even a sharper decline, and said that Malaysian inventories may drop 17% from a month earlier to 1.67 million tons.

“Crude palm oil is continuing on its recovery path as attention turns to January production and reserves data,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

Prices are sensitive to changes in stockpiles, which are seen dipping below two million tons, he said.

The market was helped by a jump in petroleum prices, which raised the tropical oil’s appeal as a biofuel, and a third day of gains in US soybean and soybean oil prices on expectations of a rise in demand from China.

China scooped up about 10 cargoes of soybeans from South America, easing concerns the world’s largest importer will cancel purchases due to the spread of the coronavirus, according to people familiar with the matter.

The deals show the Asian nation currently has no plans to declare force majeure and cancel shipments it previously bought, the people said. - Bloomberg