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CPO Futures Decline on Rising Inventories Despite July Export Boost

10 Jul 2024 4:54 pm
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MUMBAI, 10 Jul (Commoditiescontrol): Malaysian crude palm oil (CPO) futures continued their downward trajectory on Wednesday, influenced by a surge in inventories to a four-month high in June and weakness in competing oils like soyoil. Despite a notable increase in July exports offering some support, the benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange fell 41 ringgit, or 1.04%, to settle at 3,918 ringgit per metric ton. This followed a 2% decline in the previous session.

The rise in palm oil stocks has posed significant challenges for producers, prompting concerns among traders about the complex market dynamics resulting from simultaneous increases in prices and inventories. Producers are now faced with the dilemma of potentially offering discounts to alleviate stockpiles and to remain competitive against alternative oils such as soyoil and sunflower oil.

Data from Malaysia's industry regulator, the Malaysian Palm Oil Board (MPOB), revealed that palm oil stocks at the end of June surged by 4.35% to 1.83 million metric tons compared to the previous month. Concurrently, crude palm oil production in June saw a decline of 5.23% from May, totaling 1.62 million tons, while palm oil exports plummeted by 12.82% to 1.21 million tons.

The global market dynamics further influenced palm oil prices, as evidenced by the movement in soyoil futures. U.S. soyoil futures dropped 0.22% following a significant 4% loss the day prior, while China's most active soyoil futures fell by 3% on Wednesday. Palm oil, being part of the global vegetable oils market, is sensitive to price changes in competing oils.

Despite the recent downtrend in prices, there has been an uptick in demand from price-sensitive markets such as India and China. According to a trader based in New Delhi, exports of Malaysian palm oil products during the first ten days of July surged by 82.1% to 85.9% compared to the previous month, as reported by cargo surveyors.

Looking ahead, technical analysis suggests that palm oil prices may further decline to 3,830 ringgit per metric ton. However, the Malaysian Palm Oil Council (MPOC) anticipates that prices will find support from tightened production conditions and robust demand from top buyers like India and China.

(By Commoditiescontrol Bureau; +91 98201 30172)

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