DJPO: BMD CPO Futures Likely Just Above 3000 Mid Year - Analyst James Fry.
Palm-oil futures on the Bursa Malaysia are likely to move just above
MYR3,000/ton if Brent crude stays at $110 a barrel, a leading oilseed analyst
said Wednesday.
Current drought and biodiesel demand in Southeast Asia is contributing to
supply tightness, London-based consultancy LMC International Ltd. Chairman James
Fry told an industry conference.
"Fears about the future are now driving prices. The current drought will cut
Southeast Asian crude palm oil output in the third quarter with a further
adverse impact at the end of 2014," Mr. Fry said.
Rising biofuel mandates will also add to market tightness, he added.
Both Indonesia and Malaysia have mandated higher palm-oil content in their
biodiesel blend which is expected to boost domestic consumption. The two
countries account for 90% of world palm-oil supply.
Increased biofuel demand in Southeast Asia will take some heat off a slowing
in demand in the U.S. and the European Union, Mr. Fry said.
Emerging demand for oilseed-based biodiesel from other regions will add to
consumption. "We have also seen the emergence of new discretionary demand for
imported biodiesel as a cheap fuel in China and in blends into Africa," he said
adding the potential demand for biofuels will keep losses limited.
"The market today is looking ahead--anticipating events in the form of a
sharper reduction in stocks than usual," he added.
Malaysian palm-oil stocks will fall below 1.5 million tons by June--20% less
than the 1.93 million tons in January, Mr. Fry said.
Source: DJPO; Write to Huileng Tan at huileng.tan@wsj.com