Mumbai (Commoditiescontrol) - Malaysian palm oil futures continued to recover this week supported by widening spread over soybean oil which sparked a short-covering and a bottom hunting on Bursa Malaysia Derivatives.
Crude palm oil futures on Bursa Malaysia Derivatives gained 47 ringgit, first time in last few weeks.
Meanwhile, GAPKI has estimated a 6.3 percent decline in Indonesian palm oil stocks for August month which also boosted sentiments to some extent.
The other supportive factors were crude oil prices and bullish export figures with a rise of 50 percent for September month.
However, the stockpiles are set to surge in Malaysia and Indonesia during the peak production month. MPOA and CIMB has also pegged Malaysian palm oil production to rise by 15.4 percent and 15 percent, respectively.
While, the demand is likely to cool down in October month as indicated by export estimates for October 1-5 period by ITS with 43 percent decline to 149,315 tonnes as compared to 2,62,020 tonnes exported during the same period in September with major buyer India which is likely to remain on the sideline amid depreciation in Indian Rupee against US Dollar.
Palm oil FOB Indonesia is currently being offered at USD 512.5 per ton, while Gasoil prices are seen at USD736 per ton. Palm oil is currently at discount of USD224 over Gas oil and if the spread remains attractive for a broader period of time, demand for palm oil will come from bio-diesel sector.
However, once the prices start to go up, rising inventories will put pressure back on palm oil prices.
MPOB will release its estimates for Malaysian palm oil demand and supply for September month later in October.
Domestic RBD Palm olein Scenario
As per our expectations, RBD palm olein prices remained in the range of 655-660 per 10 kg in the week ended October 6.
The demand was seen good amid festival season. However, the demand may be affected ahead against the backdrop of depreciation in Indian Rupee, which is making imports more costlier than before. Moreover, the RBI has revised reference rates for USD-INR for imports to 74.60 from 73.65, so a whopping 95 paise increase will further impact country’s purchasing power.
RBD Palm olein prices at Kandla were trading at Rs. 655-660 per 10 kg from last week’s 660-662 per 10 kg.
There are reports that buyers from Karnataka line and Tamil Nadu line are purchasing RBD Palm olein aggressively from Telangana region, creating a short-supply and thus palm olein prices have recovered from 655 levels to 660.
The widened Palm oil-sun oil spread is also likely to be favourable for the palm oil for the some time, while low availability of rice bran oil and cotton seed oil is pushing demand for palm oil in the wake of lower prices.
By analyzing RBD Palm olein price movement Kandla, it looks like a corrective decline is unfolding and once it gets over, prices are likely to rise further.
Conclusion : RBD palm olein prices are expected to trade in the range of 662-665 per 10 kg next week.
(By Commoditiescontrol Bureau)
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