Demand for Palm Oil Rises, Driving Down Inventories in Indonesia and Malaysia

Demand for palm oil has been increasing due to its discount in relation to soyoil and sunoil. This rise in demand is driven by the recent price increase in rival oils caused by production concerns in the U.S. and supply disruptions from the Black Sea region. As a result, Indonesia and Malaysia are expected to see a decrease in their palm oil inventories while also bolstering Malaysian palm oil futures.

India, the world’s biggest buyer of edible oils, imported 1.09 million metric tons of palm oil in July, which is nearly 60% more than the previous month and the highest amount in seven months. The surge in demand is expected to continue in August and September.

Palm oil is priced at $910 per tonne including cost, insurance, and freight (CIF) to India for September shipments, compared to $1,050 and $1,010 for soyoil and sunflower oil, respectively. The recent price increase in soyoil and sunflower oil resulted from production concerns in the United States and lower supplies from Argentina. Furthermore, the withdrawal of Russia from the Black Sea grains deal caused an increase in the price of sunflower oil.

Price-sensitive Asian buyers, including China, Bangladesh, and Pakistan, have also been increasing their palm oil purchases for August and September shipments. China’s vegetable oil imports, which mainly consist of palm oil, increased by 48% in July compared to the previous year.

The growing exports of palm oil from Malaysia and Indonesia are expected to gradually reduce the discount of palm oil in relation to rival oils. Malaysia’s palm oil exports increased by 15.55% to 1.35 million tons in July. In the first ten days of August, exports of Malaysian palm oil products rose by 17.5% to 383,795 tons.

Overall, the increasing demand for palm oil is driving down inventories in Indonesia and Malaysia while also benefiting Malaysian palm oil futures.

Tags: futures, demand, price, Black Sea region, Production, Malaysia, soyoil, palm oil, sunoil, U.S.