After the rise in crude oil on Monday, Malaysian palm oil futures extended their gains on Tuesday, reaching $3,920 per tonne, their highest level since March 17th.
Oil costs rose on Tuesday after OPEC+ plans to cut more creation shocked markets the earlier day, with financial backers’ consideration moving to request patterns and the effect of greater costs on the worldwide economy.
In the meantime, Malaysia revealed that it had signed a memorandum of understanding with a trade association supported by the Chinese government to encourage palm oil trading and cooperation.
In parallel, cargo surveyors’ data indicated that during the first 25 days of March, shipments of Malaysian palm oil products increased between 11.4 and 19.8 percent month-over-month.
To support domestic demand, Indonesia’s rival has previously restricted shipments until the end of Ramadan and the Eid celebration. Additionally, the overnight gain in soybean oil on the Chicago Board of Trade mirrored the upward momentum in palm oil prices.
According to Abdul Hameed, director of sales at Mansoor Trading in Lahore, Pakistan, “Palm oil futures market take the advantage of crude oil surprising news.” On Sunday, OPEC+ unexpectedly slashed crude oil output in what Saudi Arabia, the top producer, referred to as a precautionary measure to support market stability.
However, he believe that the current bullish momentum is only short-term and that only external factors are driving the market, and that the relevant vegetable oil has also pushed up the palm price.
As a result of slow demand and selling pressure from the paper market, palm oil’s own fundamentals are unable to maintain above the 4000RM level. However, his concern is with demand from China, India, and Pakistan.
In addition, the price gap between palm oil and rapeseed oil is very narrow in Rotterdam, where soya is only 60 dollars per ton more expensive than palm oil. As a result, palm demand cannot increase due to a lack of interest from traders.
Both countries’ production will increase this month, and Malaysia’s palm oil market will suffer as a result of Indonesia’s own trade exchange.