Palm Oil Starts the Year Staring Down the Bears Amid Low Buying Interest

RBD Palm Oil

Published Jan 13, 2023

Crude palm oil prices have started the year weaker breaking below the $1000/mt psychological level by the end of the first week of the new year. Crude Palm Oil – CIF Rotterdam is currently at $967.50. Apart from in September 2022 when prices fell to a flat $900/mt, this is the lowest they've been in a year. The current price behaviour seems to be an extension of a trend of losses that began at the start of November last year. The CIF Rotterdam price is now 29% up from the price at the same time a year ago when it was trading at $1365/mt.

Crude palm oil prices have started the year weaker breaking below the $1000/mt psychological level by the end of the first week of the new year. Crude Palm Oil – CIF Rotterdam is currently at $967.50. Apart from in September 2022 when prices fell to a flat $900/mt, this is the lowest they've been in a year. The current price behaviour seems to be an extension of a trend of losses that began at the start of November last year. The CIF Rotterdam price is now 29% down from the price at the same time a year ago when it was trading at $1365/mt.

Malaysia’s Crude Palm oil prices have also registered consecutive losses since the start of the year. The daily crude palm oil price quoted by the Malaysia Palm Oil Board (MPOB) settled yesterday the 12th of January at RM 3911/mt from RM 4253 on the 3rd of January.

The Tridge RBD palm oil indices are also showing similar difficulties this month- the RBD Palm Oil / Low-Quality Indonesia (Jakarta) / Wholesale settled at $1.09/kg at the end of December 22 but recent trades on 9th January settled at $1/kg.

Palm oil is on a bearish momentum owing to a lacking demand of for the commodity and a general lack of buying interest at present. The looming global recession is possibly restraining the general consumption behaviour in some markets. While uncertainty seems to hover around the amount of crude palm oil that would be required for biodiesel production, the cold winter temperatures in Europe and elsewhere at this time of year is also curbing demand.

Increased profit-taking in the vegetable oils equity markets in China is adding pressure. Palm oil is also following the weakness in other edible oils across the board: soybean, rapeseed oil and sunflower have seen major downtrends which crossed over into the new year.

Although demand is near absent, Indonesia has shipped about 0.2 million mt of crude palm oil to the Indian market according to a recent market report – this appears to have put some downward pressure on palm oil prices. Discouraging fundamental data published by the MPOB has in addition put a slant on prices.In Malaysia, crude palm oil production in the month of December came up to 1.61 million mt down 3.7% MoM. Crude palm oil stock inventories and palm oil export also fell a little under 1% and 3.4% to 1.29 million mt and 1.46 million mt respectively.

Malaysia, a major palm oil producer has entered the cycle of lower palm oil production while of Indonesia started in the last quarter of last year. The expectation that production would be lackadaisical at this time of year has contributed to prices not pushing up on the poor fundamental news.That said, the tight supply would cause the upside to gain some strength at least in the near term before coming back down when the South American soybean harvest is completed and begins to be traded into the market around April.