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Anticipation Of Higher Stocks To Weigh On CPO

July 10, 2023

KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade lower this week given the expectation of higher stocks and muted demand.

The Malaysian Palm Oil Board supply and demand report is scheduled to be released today, which could determine market movements throughout the week, palm oil trader David Ng said.

He told Bernama that stocks are likely to increase by 6% in June 2023 compared to May 2023.

“Hence, we expect prices to trade between RM3,650 and RM3,900 per tonne,” Ng said.

Mumbai-based Sunvin Group commodity research head Anilkumar Bagani recently projected that Malaysian palm oil June end stocks to be at 1.86 million tonnes, up by 11% from 1.69 million tonnes in May, on the back of a slight decline of 3% in production and 2.7% drop in exports.

Earlier, the Malaysian Palm Oil Association estimated that palm oil output for June stood at 1.41 million tonnes, down by 7.39% from May.

Ng said the market also continued to track the movement of soybean oil prices, which are currently on an uptrend following lower production in the United States amid bad weather conditions.

When the rival soybean oil price is high, the palm oil price also will follow suit, he noted.

For the week just ended, CPO futures traded mostly lower tracking movement in soybean oil futures on the Chicago Board of Trade.

Last Monday, the benchmark month of the CPO closed near the RM4,000 level at a more than three-month high amid a rally in vegetable oil markets.

The market then stayed mostly in the red amid exports and stock worries as well as concerns over the United States interest rate outlook.

On a weekly basis, July 2023 rose RM6 to RM3,757 per tonne, August 2023 rose RM20 to RM3,814 per tonne, September 2023 earned RM45 to RM3,834 per tonne, October 2023 increased RM64 to RM3,849 per tonne, November 2023 put on RM69 to RM3,860 per tonne and December 2023 improved by RM76 to RM3,874 per tonne.

The total weekly volume climbed to 338,013 lots from 212,304 lots, while open interest fell sharply to 181,912 from 237,110 contracts last Friday.

The physical CPO price for July South was unchanged at RM3,830 a tonne. — Bernama

Source : The Star