Jakarta, CNBC Indonesia – Price drop trend crude palm oil (CPO) still not over. Throughout this week, CPO fell 6.5%, after falling more than 11% last week. In fact, the still high supply of CPO in Malaysia and Indonesia as well as low demand have made the price continue to decline, and is even predicted to fall again in the next few months.
According to Refinitiv data, the price of CPO on the Malaysian Derivatives Exchange for the September contract ended the week at 3,424 ringgit (RM) per tonne. This level is the lowest since early February. In addition, if you look further back, in the last five weeks, CPO prices have fallen by more than 24%.
With this decline, this vegetable oil is now almost entering the market bear market (downtrend), especially with sentiment bearish which is still strong.
An asset is said to be included in bear market if it has decreased by at least 20% from the highest peak. In addition, the downward trend will last for at least 2 months.
If we look at the peak price of CPO at RM 4,515/ton which was reached on May 12, CPO has fallen by 24.33%. Even if you look at the lowest level touched this week at RM 3,251/ton, CPO fell more than 28%.
Data from the Malaysian Palm Oil Board (MPOB) showed that the neighboring country’s palm oil inventories at the end of May rose 1.5% from the previous month to 1.57 million tons.
The increase was caused by increased production and weak exports. CPO production rose 2.84% over the previous month to 1.57 million tonnes while exports fell 6% on a monthly basis to 1.27 million tonnes.
CGS-CIMB in its research said sentiment bearish will continue to overshadow the price of CPO until there is clarity regarding the level of production.
“Industry players and analysts are reviewing their production estimates in Malaysia (the second largest CPO producer in the world after Indonesia), because the surge in Covid-19 cases has caused a decline in the workforce,” the research said as quoted by The Edge Markets, Thursday (17/17/2020). 6/20210).
Meanwhile, demand for CPO is still weak as seen from Malaysia’s exports for the period 1-15 June 2021, which is estimated to fall by 7.9% compared to the previous month’s 657,474 tons by Societe Generale de Surveillance, as reported Reuters.
Meanwhile, Jim Teh, a senior palm oil trader at the Interband Group of Companies, said that the decline in CPO prices will continue in the next few months due to high inventories in Malaysia and Indonesia, while demand is still weak.
“There are no major events (which could trigger an increase in demand) in the next few months. We expect the trend to continue bearish, as well as weak demand which makes CPO prices continue to decline,” said Teh to Bernama, as reported by The Star, Saturday (19/6/2021).
CNBC INDONESIA RESEARCH TEAM
(pap / pap)
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