KUALA LUMPUR, July 13 (Xinhua) -- Analysts on Wednesday expected softer crude palm oil (CPO) prices in the near term, pressured by higher inventory levels in Indonesia.
Public Invest Research said in a note that it thinks CPO prices could stay weak in the near-term and trade at larger discounts over competing edible oils until Indonesia clears the excessive stocks ahead of the peak production season.
"We expect to see CPO prices falling to 3,800 ringgit (about 857 U.S. dollars) per tonne by year-end," it said.
Since the announcement of the removal of the export ban in Indonesia, CPO futures had slumped 35 percent from its recent peak of 6,324 ringgit per tonne to the current level of 4,130 ringgit per tonne.
Singapore-headquartered brokerage firm UOB Kay Hian also expects CPO prices to remain weak in the near term with the Indonesian government starting to allow more exports by increasing the domestic market obligation ratio and logistic congestion in Indonesia easing towards end-July.
It believes the news flow would send a negative signal to the market with an impression of high inventory level in Indonesia and cause buyers to wait for a lower purchase price.
Even though it expects CPO prices would still remain soft in the short term in view of the supply coming from Indonesia with more relaxations on their palm oil export and biodiesel policies, it believes CPO prices may sustain at about 4,000 per tonne for the second half.
It also expects CPO price would be supported at a range of 3,500 ringgit to 4,500 ringgit per tonne with the returning demand from destination markets in late third quarter to fourth quarter.
CGS CIMB, on the other hand, believes CPO prices could trade in the 4,000 ringgit to 5,000 ringgit per tonne range in July as they face higher-than-usual palm oil export supply from Indonesia, after the Indonesian government tweaked its export policies to accommodate higher exports to clear burdensome stocks in the country.
It also projects Malaysia's palm oil stocks to rise by 21.4 percent month on month to 2 million tonnes by end-July due to increasing competition from Indonesian exports. ■