Palm Oil Prices Increase on Clearer Sentiment
The MBP for Crude Palm Oil CIF Rotterdam [Mintec Code: CPOR] was assessed on 23 February at $994.50/mt, up $15.00/mt on the week. The price increase was due to the increased exports from Malaysia over February which are estimated to be up 30%, according to market players, as compared to January. This may mean that demand for palm oil over the first half of February has seemingly increased and may draw down some of the high stocks that were clear in the market. Adding to the mounting bullish sentiment are Malaysian and Indonesian palm oil production estimates for the first half of February, which are estimated down 9% within Malaysia and 3% in Indonesia as compared to the same time in January, according to market players. This fundamental convergence is important, as now both export and production “are suggesting the market is more bullish than bearish and now we have more clarity moving away from the mixed fundamentals we had in the last few weeks,” a trader told Mintec.
A separate trader commented, “despite stocks having been high for key players, such as India and China, buying is still taking place. The high export figures are evidence of this. Some in the market have said the lower production is due to seasonal declines and in April things will pick back up. I am uncertain this is going to be the case. In April we have Ramadan and other key festivals, which means there are going to be a lot of national holidays. It could be a while before palm oil production ramps up and thus we could have some bullish price action in the near term.
In addition, Indonesia, on 6 February changed its palm oil export policy by suspending two-thirds of unutilised export permits until April, ‘forcing’ supply to the domestic market. Exporters had built up large stockpiles of export permits which were given when supplying the domestic market with palm oil at the required 1:6 ratio (1 tonne of palm oil supplied to the domestic market for every 6 tonnes exported). Despite causing some confusion, the new policy was thought to have a limited impact on price. However, Mintec has learnt that very little of the export permit allocation has been filled meaning that exports from Indonesia have slowed significantly more than expected, this is leading to less supply in the marketplace and may provide bullish sentiment in the coming weeks according to market players.
