News
14.01.2010
Palm oil weakness 'may prove short lived'
The weakness in palm oil prices, which have slid 8% in the past week, may prove short-lived thanks to the global squeeze on vegetable oil supplies, influential analysis group Oil World has said.
The prospects for palm oil prices remain firm thanks to a fall in global soyoil supplies, following last year's drought-plagued Argentina harvest, and a fast rundown in European and Russian sunflower stocks as demand switches to sunflower oil.
Meanwhile, production of palm oil itself was under pressure in Malaysia from a replanting programme and weather setbacks.
"Palm oil prices will indeed be supported in the next four to six months, considering that soyoil supplies are still tight in South America, sun oil supples are becoming increasingly scarce and the production prospects for palm oil are at least uncertain," Oil World said.
Back to the future
Last month's rally looked a better reflection of palm oil's potential than the fall from last week's seven-month high on data showing a jump in Malaysian inventories in December, sagging exports so far in January and tumbling prices of Chicago crops.
"The remarkable rally of palm oil prices in December and early January showed the market's ability to look ahead instead of just responding ad hoc to known facts regarding production, exports and stocks," Oil World said.
The comments come two weeks after Sabri Ahmad, chairman of regulator the Malaysian Palm Oil Board, forecast palm oil prices remaining firm this year thanks to "steady global demand, tree stress and a possible resurgence of the El Nino", a disruptive weather pattern associated with elevated Pacific water temperatures.
"Crude palm oil prices will be OK," Mr Ahmad said.
"[Palm] fruit production is expected to drop 20% due to tree stress and this will be a boon to crude palm oil prices."
Benchmark March palm oil stood at 2,487 ringgit a tonne in late deals in Kuala Lumpur, down 2.7% on the day.
Agrimoney
