Price Performance Indicators

CPOTR Focus:

• (29/10 – 05/11) CPO prices closed the week with a slight increase of 0.85%
• Despite falling, CPO is still far from near the lowest level during the pandemic

Having faced a pullback correction ahead of the turn of the week, the crude palm oil (CPOTR) contract which was previously in rally mode finally closed its one-week session with the remaining slight gains of 0.85% - moving to the level of Rp 18,185,- per kg. The catalyst that was previously exploited from the sentiment of rising demand that was not matched by the presence of supply, as well as the direct impact of the rally in oil prices – was significantly faded by a combination of profit-taking and negative turn-around news from one of the main producers of CPO – namely Malaysia.

Previously, CPO price tried to continue strengthening from the weekly rally trend for 6 consecutive weeks. The price rally took shape after Malaysia reportedly faced a decline in production to its lowest level in 5 years as the sector faced a shortage of workers supply. Meanwhile, supply and demand conditions are still not balanced, especially the high demand coming from CPO importers such as China, India, South Korea and Japan. This happened on the back of the rainy season, especially in India, and the energy crisis in China - which triggered an increase in world crude oil prices, also resulted in many soybean crushing factories having to close, thereby cutting soybean oil supplies.

In terms of downward pressure, the risk of profit taking will always overshadow the price of CPO – considering the strong rally that has been going on for a long time promises some trading opportunities. From the fundamental side, correcting the previous sentiment, the current supply of CPO is reported to be excessive. Where CPO stocks in Malaysia as of the end of October 2021 rose 3.4% from the previous month to 1.81 million tons. At the same time demand began to slow down. With the level of Malaysian CPO exports in October 2021, it is estimated that it will fall 11.7% to 1.41 million tons

However, the decline in production that occurred was still lower than the historical trend. Therefore, prices remain resistant to falling to pre-pandemic levels because supply chain disruption issues are still haunting the market.

Market View

Profit Taking to Winter May Cause CPO Prices to Fluctuate Further

Profit taking sentiment has become the main reason for the CPO prices to move correctively, since the CPO prices had rose more than 20% in the past couple of months. While profit taking undermining the CPO prices, ahead winter season were also the become another main focused as by several country were slowing their demand because the nature of CPO that tend to freeze during the winter season and switch to another type of vegetable oil. Will the corrective for CPO prices happened in several weeks ahead as winter season comes usually around November and December?

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research