CPO prices to head higher in 2008/09: Analyst

A Standard Chartered analyst expects continuous growth in demand, despite turbulence in the biodiesel sector, to provide the momentum needed for crude palm oil to rise further

LONDON: Crude palm oil prices should rise during 2008/09 with consumption growing at a faster pace than production, Standard Chartered analyst Abah Ofon said in a report yesterday.

“For now ample supply conditions will prevent a sudden spike in prices but continuous growth in demand, despite turbulence in the biodiesel sector, should provide the momentum needed for prices to head higher through the 2008/09 season,” he said.

Crude oil prices fell sharply towards the end of the first quarter and have so far recouped less than 50 per cent of their losses, in contrast to soyoil which had regained almost 90 per cent after a similar setback.

Ofon said production increases in Indonesia and Malaysia had eased market concern about the likelihood of tighter stocks.

He noted, however, that tight export supplies of other edible oils such as sunflower oil and soyoil and the wide price discount for CPO boosted exports during the first half of 2008.

“In the near term, high energy prices and freight costs will provide some support as will spillover gains from the soy complex on account of tight stocks in the US and crush delays in Argentina,” he said.

Ofon said biodiesel demand could now be the weakest part in the overall demand picture with the rising cost of edible oils slowing biodiesel output growth in a number of producers, including Europe. - Reuters