Crude palm oil price movement revolves around petroleum market, says plantation expert

KUALA LUMPUR, June 22 — Petroleum is the key to understanding the palm oil market today as it determines the crude palm oil (CPO) price range via the price band and is also a sign of the state of the world economy, plantation expert James Fry of LMC International Ltd said.

He said it is difficult for the palm oil market to be upbeat as the world is in a deep recession.

“If the Organisation of the Petroleum Exporting Countries (Opec) is sensible, Brent may approach US$50 (RM213.70) per barrel by year-end,” he said during a slide presentation on Palm Oil Internet Seminar (Pointers) organised by the Malaysian Palm Oil Council and Bursa Malaysia from June 22 until June 28.

Brent crude is currently trading at US$42.21 per barrel, up by 0.05 per cent.

Fry noted that if benchmark Brent crude oil is trading at US$50 per barrel, this implies EU CPO prices are slightly below US$500 per tonne (US$1=RM4.28).

The plantation expert also said that the palm oil supply has been surprisingly little affected by lockdowns and Covid-19.

To recap, the Malaysian government first imposed a movement control order on March 18, which saw all industries in the country disrupted.

However, realising palm oil as part of the essential basket, the industry was given an exemption to operate, but had to adhere to the standard operating procedure.

“The coronavirus surprisingly had little impact on the palm oil supply. There was a brief period of lockdown in Sabah but it has ended and it has not really affected production,” he said, adding that Malaysian palm oil production will barely change in 2020.

He said palm oil stocks are expected to rise above three million tonnes, in line with those of palm kernel oil, and as stocks rise, the price will fall slightly.

“Vegetable oil demand is where the damage from Covid-19 is felt. Fuel demand is hit by recession and so, even with biodiesel mandates, the consumption of biodiesel has suffered.

“Food demand has also been damaged, and we are learning just how important the hospitality sector is for palm oil consumption. Fast food places, snack bars, hotel institutions are the big users of palm oil, and the pandemic has really hit the sector,” he said.

This year marks the 10th anniversary of the Pointers platform which was launched in 2010 with a member base of only 200.

Over the last 10 years, Pointers’ following has increased significantly, and it currently has more than 5000 registered members originating from over 50 countries.

The platform has proven to be an effective tool to reach out to the global audience for providing not only price trends of major edible oils but also for sharing key developments and opportunities from different regions of the world.

For this special edition of Pointers, MPOC and Bursa Malaysia Derivatives have gathered 10 expert speakers who will share their views on industry developments, price outlook and the impact of Covid-19 on the demand in major markets. — Bernama