PETALING JAYA: MIDF Research forecasts the average local crude palm oil (CPO) delivery price will close 4.4% month-on-month (m-o-m) higher at RM3,891 per tonne in October, due to moderate El-Nino events.
In September, the local CPO delivery price eased to RM3,687 per tonne, attributed to optimism regarding local production levels, the research firm said in a note today.
“We estimated September’s price to increase by 3.7% m-o-m to RM3,945 per tonne due to the drier month, however, it appears that favourable weather has eroded the gains, and the price weakened in line with improved productivity,” it said.
At the same time, Hong Leong Investment Bank (HLIB) said it expects a flattish stockpile trend in October, as seasonally higher cropping patterns will likely be offset by potentially stronger near-term demand for palm oil.
It added that year-to-date, CPO price averaged RM3,880 per tonne.
“We are in the midst of reviewing our CPO price assumption of RM4,000 per tonne for 2024 (with downside bias), as we believe seasonally higher cropping patterns for palm, high vegetable stock levels among key consuming countries and weak near-term demand sentiment will suppress near-term CPO price movement.
“We maintain our ‘neutral’ stance on the sector, given the absence of a notable demand catalyst. For exposure, our top pick is IOI Corp Bhd, given its commendable valuations,” HLIB said.
Meanwhile, RHB Research said crude oil prices remain elevated as geopolitical tensions rise, but this has not had a similar effect on CPO prices, likely due to the offsetting impact of the stronger US dollar.
Nevertheless, if the palm oil-gas oil spread remains positive, this could result in the discretionary demand for biodiesel rising by 2.5 to 3 million tonnes per annum.
“While a pick-up in demand is anticipated due to the festive season, higher competition and the peak output season would mean that palm oil stocks still exceed two million tonnes – potentially until the end of the year, at least.
“We maintain our RM3,900 per tonne CPO price assumption for 2023 and 2024, and continue to prefer Malaysian players versus regional players,” it said in a separate note.
Meanwhile, Maybank Investment Bank (Maybank IB) said the currently wide CPO price gaps vis-à-vis major competing oils need to be sustained to stimulate demand for palm oil until such time that the market believes the stockpile has peaked.
“We reiterate our view that CPO price will likely soften, or at best, stay at current levels at least for the rest of the year before trending higher into the early part of 2024 on a seasonal low output cycle.
“We are positive that the October stockpile may continue to climb on a still strong output trend. Hence, we maintain our 2023 CPO average selling price forecast of RM3,700 per tonne as CPO needs to stay price competitive in the short-term to help boost demand,” Maybank IB said.