Malaysian analyst expects the crude palm oil (CPO) prices to remain high in the first half, underpinned by factors included strong Chinese demand.
RHB Investment Bank Research said in a report on Monday that it anticipated CPO prices in the first half to stay at a range of 2,700 ringgit to 3,100 ringgit (about 665 dollars to 739 dollars) per tonne, before seasonally weakening to 2,400 ringgit to 2,700 ringgit per tonne in the second half.
According to the report, strong food demand from China and India would support the CPO prices. China’s CPO imports have been very strong – up 45 per cent year-on-year to date, while edible oil imports rose 55 per cent.
Other palm oil prices driven factors included a CPO deficit this year, as demand growth outstrips supply growth and stock usage ratios fall below historical averages.
Biodiesel, the largest demand catalyst, is still a driver for palm oil in Indonesia and Malaysia.
“CPO prices have risen sharply to above 3,000 ringgit per ton. While we had expected an improvement in prices towards the year-end, the strength of the price rally caught us by surprise,’’ the research house said.
However, it believed there might be a slight correction, as there could be some speculative elements at play.
The research house, given this scenario, revised its CPO price forecast up to 2,600 ringgit per tonne for 2020, while leaving its 2021 estimate intact at 2,500 ringgit per tonne.
According to the report, this implied a substantial 22-per cent year-on-year increase in CPO prices from 2019’s average price of 2,129 ringgit per tonne.