Reported & Analysis By B-Trams
Today Palm oil market were at MYR 3,360 per tonne, recovering slightly from the two-and-a-half-year low of MYR 3,200 touched on May 31st as the key biodiesel feedstock tracked the slight recovery for crude oil prices.
However, OPEC+ meeting this Sunday was called by Saudi Arabia to chastise other members for pumping more crude oil than they agreed. Russia is at the top of the list of over-producers.
Late last week and early this week, some analysts thought OPEC+ members were going to be told on June 4th they would receive the same spanking by the Saudis. That expectation had all but disappeared by yesterday as crude oil prices market turned higher, recovering most of the week’s losses despite this week’s inventory report that showed crude oil inventories rose more than expected..
Market thinks it is unlikely OPEC+ will further reduce production quotas on Sunday, but some analysts see it is a possibility as demand indicators from China and the U.S. have been disappointing in recent weeks.
While as cargo surveyors indicate that malaysian exports contracted between 0.8% and 1.8% in May. On the supply side, domestic production is expected to have jumped between 20%-30% in April, rebounding sharply from the recent lows during the Raya holidays.
|Malaysia 1-31 May 2023 vs. 1-30 Apr 2023 export (in ton)|
|1,166,880||1,176,432||(-9,552 or down 0.81%)|
|AS PER AMSPEC REPORT|
|1,085,070||1,104,726||(-19,656 or down 1.78%)|
|SPPOMA 1–31 May 2023 vs. 1-30 Apr 2023|
Elsewhere, soaring output levels in top producer Indonesia are anticipated to oversupply a weaker domestic market. Also supporting output, also the latest forecasts expect that the incoming El Nino phenomenon is unlikely to impact palm oil production through multiple Southeast Asian hubs this year, although threats for the next year linger.
Meanwhile Palm oil freight market rates were steady to higher this week, with more inquiries for second-half June shipments amid tighter vessel availability, keeping rates supported.
Freight for 18,000-20,000 tonnes vessels from Southeast Asia to West Coast India was holding steady at $40-42 per tonne, unchanged from a week ago, while freight rates to East Coast India for 10,000-12,000 tonnes shipments were around $34-36 per tonne.
“There have been a number of inquiries for vessels to India for the second half of June, but availability of full ships is tight now as there was a glut of end-May cargoes and prompt space was taken up,” a regional shipbroker told Fastmarkets Agriculture.“Those vessels are still on the way to India and are unable to make it back for the second half of June,” the shipbroker added.
Buying interest from India for June and July-September volumes has picked up more in the last few weeks, with palm’s discount against other rival soft oils widening compared to the spread seen in March-April.
“We’re still looking for vessels at the moment for June; the challenge is because there are also fewer vessels available which meet China’s strict requirements for shipping olein,” one trader with dealings to China said.
Also For vessels carrying edible oil into China, the ship’s last three cargoes are also required to be of edible grade to reduce any risk of contamination.
This is on top of additional specifications and standards imposed by the Inspection and Quarantine authority (CIQ) for edible oil imports into the country.
Buying has also been more active for June shipments following earlier expectations that Indonesia will lower its reference price and effectively its export taxes for CPO for the June 1-15 period from the previous $169 per tonne to $118 per tonne, with taxes for other palm oil products also lowered, thereby making Indonesian products cheaper.