Weaker exports, high stockpiles push CPO futures down

KUALA LUMPUR - The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives (BMD) ended lower on Monday due to concerns over mounting stockpiles and weaker exports of the commodity.

According to the Malaysian Palm Oil Board (MPOB), Malaysia’s total palm oil stocks surged by 22.54 per cent to 2.12 million tonnes in August 2023, from 1.73 million tonnes in July.

The CPO inventory jumped 35.45 per cent to 1.2 million tonnes last month from 886,384 tonnes in July.

Palm oil exports fell by 9.78 per cent, or 132,522 tonnes, to 1.22 million tonnes in August from 1.35 million tonnes previously.

Palm oil trader David Ng said CPO extended last week's losses as mounting stockpiles in the country put pressure on prices. "We locate support at RM 3,650 per tonne and resistance at RM3,900,” he told Bernama.

Mumbai-based Sunvin Group commodity research head Anilkumar Bagani said prior to the MPOB data, BMD CPO futures were seen trading sideways, "and the report is clearly bearish for palm oil.”

"The market was fluctuating in a tight range following bullish Chinese vegetable oil futures and Chicago Board of Trade (CBOT) Soybean oil futures in Asian hours but a lack of fresh demand keeps hurting the sentiment,” he added.

He said the market focus is now on September palm oil export and production, "where export is likely to drop due to record high stocks at key destination markets like India while a slide in sunflower oil and soybean oil prices at respective origin markets would force palm oil to keep its discount intact to gain fresh buying support.”

"The production (outlook) is, however, (rather) confusing, as the market is still heavily reliant on the El-Nino impact and expecting a cut in production from October onward, but as of now no such indication is seen in both Indonesia and Malaysia,” he added.

The September 2023 and October 2023 contracts lost RM102 to RM3,628 and RM3,650 per tonne, respectively, while November 2023 was RM117 lower at RM3,713 and December 2023 fell RM110 to RM3,769.

The January 2024 note eased RM95 to RM3,823 per tonne and February 2023 slipped by RM90 to RM3,857.

Total volume slid to 37,071 lots from 66,359 on Friday while open interest narrowed to 240,196 contracts from 272,970 previously.

The physical CPO price for September South was RM50 lower at RM3,750 per tonne. - BERNAMA