KUALA LUMPUR, Sept. 13 (Xinhua) -- Analysts on Tuesday foresaw crude palm oil (CPO) prices will trade sideways in the near term after Malaysia's palm oil inventory hit a 33-month high.
Maybank Investment Bank Research said in a note that it expects the CPO price to continue to trade sideways over the next month as the market continues to digest the large palm oil stockpile residing in Indonesia (due to earlier export restrictions) aggravated by seasonal peak production period.
According to the research house, seasonal pickup in output and weak exports due to competition from Indonesia have lifted Malaysia's August stockpile to a 33-month high of 2.09 million tons.
CPO average selling price for the month of August recovered marginally month on month to 4,169 ringgit (925 U.S. dollars) per ton.
Maybank Investment Bank Research foresees CPO price will trade at 5,000 ringgit (1,109 dollars) for 2022, and 3,400 ringgit (754.38 dollars) for 2023.
MIDF Research also in a note expects CPO price to be trading sideways in the remaining month about 3,500 ringgit (777 dollars) to 4,000 ringgit (888 dollars) per ton benefitting from the price disparity between CPO against soybean oil prices which was around 477 dollars in July.
However, the research house also recognized its downside risk on fragile demand outlook on the back of inflationary pressure coupled with tight household spending on high base interest rate locally and globally.
"We still maintain our CPO target price at 5,500 ringgit (1,220 dollars) per ton for 2022," it said.
While Malaysia's palm oil stocks in August were above its expectation, it projected palm oil stocks to rise 9.2 percent month on month to 2.29 million tons by the end of September.
According to the research house, CPO prices could weaken due to higher Indonesian palm oil exports following the recent extension of the palm oil export levy waiver to Oct. 31, as well as current high palm inventories.
"However, the downside will be capped by the current CPO wide pricing discount of 531 dollars per ton against soybean oil as on Sept. 8," it said.
RHB Research, on the other hand, said CPO prices remain under pressure as stock levels have risen in Malaysia due to Indonesia's policy reversal.
"Stock levels in Malaysia could remain high until Indonesia's tax-free holiday ends (at end-October), which means exports from Malaysia could only improve towards the year-end," it said.
According to the research house, this, together with potential disappointments in output in Malaysia due to the prevailing labor shortages, could mean stock levels may only drop towards the year-end.
It maintained CPO average selling price at 5,100 ringgit (1,132 dollars) per ton for 2022.
Hong Leong Investment Bank Research also said Malaysia's palm oil stockpile will likely remain elevated in September, on the back of seasonally higher output trend and the Indonesian government's move to accelerate palm oil exports.
This will in turn drag palm oil exports from Malaysia, which will more than offset potentially higher demand from India, it said.
After hitting an all-time-high of 8,074 ringgit (1,791 dollars) per ton in early March, CPO price has been trending down on Indonesia's move to flush out palm oil inventories. ■