Mr Thomas Mielke, Ista Mielke, Oil World.
Mr Mielke said that the global market is
in a tug-of-war between bearish demand and bullish supply fundamentals. The
bearish demand stems from weakened biofuel demand due to low crude oil prices,
which will result in biodiesel demand falling for the first time in many years in 2015.
While Indonesia’s recently-announced biodiesel subsidy and cost-plus pricing for
biodiesel producers will help to boost demand for palm oil (at an assumed 3.1-3.4m
tonnes for 2015), the low crude oil prices will reduce discretionary biodiesel
production – thereby reducing vegetable oil demand by 6m tonnes. On the supply
side, while soybean supply and stock levels are still huge, this is offset somewhat by
the lack of selling by farmers in South America (as they hold out for higher prices and
store their inventory) and the ongoing worker strike in Brazil which started on 18 Feb.
For the 17 oils and fats, Mr Mielke expects a below-normal production growth of 2m
tonnes for 2014/2015 (vs +11.4m tonnes in 2013/2014), with the growth in palm oil
production to be the smallest in 13 years of only 1.5m tonnes. Based on these
factors, he expects palm oil prices to be fluctuating, but with a limited downside, while
vegetable oil prices would continue divorcing from mineral oil prices. All in, he
expects soy oil prices to recover by USD40-80/tonne in Apr/Sep 2015, while palm oil
prices would rise moderately in the same period. Average price projection for CPO
(cif Rotterdam) is USD770/tonne.
Dr. James Fry, LMC International.
Dr Fry continues to stand firmly by his thesis that
CPO prices would be dictated by the price band created by the use of vegetable oils
in biofuels. This year, he also added that export taxes would play a role in
determining the price movements, as this would make a difference if CPO prices
were high enough to attract export taxes. Dr Fry opined that 2015 would be a year of
two halves – whereby the first half would see weak South-East Asian output push
inventory of CPO to below 1.6m tonnes in 2Q15. At USD60/barrel, this means
average prices of 1H15 would be about MYR2,260/tonne (or USD625). In 2H15, he
expects stock levels to rise to well above 2.5m tonnes on the back of a hike in US
interest rates, which would result in lower Brent prices, and therefore weaker
discretionary biodiesel demand. Assuming that Brent crude oil stays at USD60/barrel,
he projects that CPO prices would fall to MYR1,770/tonne (or USD485).
Mr Dorab Mistry, Godrej International.
The last presentation was from Mr Dorab
Mistry of Godrej International. He believes although incremental global vegetable oil
supply and demand numbers look broadly in balance in 2015 – with demand forecast
to rise by 3.5m tonnes (+4m tonnes for food and -0.5m tonnes for biodiesel) and
supply projected to go up by 3.1m tonnes – this is going to be a year of two halves.
In the first six months of the year, demand will outstrip supply, but this will reverse in
the 2H15. His price assumptions are based on a Brent crude oil assumption of
USD50-75/barrel and a relatively strong US dollar. Based on this scenario, he
expects palm oil prices to rise to MYR2,500/tonne between now and May, as palm oil
production is under-performing and stocks are tight. After July, as production picks
up, he expects CPO prices to decline and fall to MYR2,100/tonne by December.