KUALA LUMPUR, Feb 16 ― OCBC Global Markets Research (OCBC Research) is maintaining its forecast that crude palm oil (CPO) prices will average RM3,650 per tonne in 2024.
The research house, which last month revised upwards its 2024 average CPO price outlook, said that overall, supply risk due to the El Nino weather phenomenon is likely to remain manageable, with both the Malaysian Palm Oil Board (MPOB) and the Indonesia Palm Oil Association (Gapki) expecting production to be largely stagnant this year.
“That said, near-term supply might be under pressure, with the Malaysian Palm Oil Council expecting Malaysia's palm oil supply to dip in February from the previous month.
“However, upside risk to prices is likely to be capped as palm oil prices have become less competitive in recent weeks,” it said in its Monthly Commodity Outlook report.
OCBC Research said palm oil prices were largely stable in 2023, while soybean oil prices dropped over 20 per cent in the same period.
“The resilience in CPO prices is likely to remain in the coming weeks as inventory concerns persist, while demand might see some recovery following the Lunar New Year celebrations in February and (with the upcoming) Ramadan festivities in March-April 2024,” it said.
OCBC Research said CPO prices averaged RM3,840 per tonne year-to-date as of the February 14 closing, up from RM3,681 per tonne in the fourth quarter of 2023.
It said the higher prices mainly reflected bullish data coming from Malaysia, as stockpiles shrank
to a six-month low while production dropped to a nine-month low by the end of last month.
It pointed specifically to data from MPOB that showed CPO stocks falling by 11.8 per cent month-on-month to 2.0 million tonnes in January and production dropping by 9.6 per cent to 1.20 million tonnes, which marked the fourth consecutive month of decline for both.
Meanwhile, OCBC Research also maintained its forecast that Brent oil prices would average US$80 per barrel in 2024 versus US$82 per barrel in 2023.
It said the downside risks to its average 2024 forecast are the lack of compliance from the Organisation of the Petroleum Exporting Countries and its allies (Opec+), the non-continuity of Opec+ additional cuts, and a worsening global demand outlook.
On the demand side, the research house anticipated a global growth slowdown for 2024 due to macroeconomic headwinds in the world’s two largest oil consumers -- the United States (US) and China.
It said China’s economic recovery will be tepid with the country still grappling with deflationary pressures and fragile market sentiments despite official announcements of more policy support and easing measures.
“Additionally, improvements in energy efficiency and the wider adoption of electric vehicles
are possible drivers for further downward pressure on oil demand,” it said.
Meanwhile, global oil supply will likely remain ample to meet weakening demand, it added.
According to the International Energy Agency, global oil supply is projected to reach a new high of 103.8 million barrels a day in 2024, with most of these gains driven by the Americas region (such as the US, Canada, Brazil, and Guyana). ― Bernama
