Palm oil supply and demand is shrinking, price expectations are rising

According to market forecasts, Malaysian palm oil production could decline by 15-17% in January, while palm oil exports are expected to increase significantly due to seasonal demand ahead of the Spring Festival and Ramadan in February. The broker noted that if these two factors (decreased production and increased exports) persist until March, ending stocks could decline significantly.

The market expects Malaysian palm oil production to decline by 15-17% in January, leading to a significant supply reduction. At the same time, exports increased significantly due to seasonal demand ahead of the Spring Festival and Ramadan in February. If this trend continues into March, ending stocks could decline significantly, and the supply-demand balance will tighten. This will significantly boost spot prices, as the dual effects of reduced supply and increased demand will create strong upward pressure on prices.

China. The domestic palm oil market has fluctuated and risen since the New Year. At the beginning of the month, the average market price of palm oil was 8,564 yuan/tonne. On January 20, the average market price of palm oil fell to 8,724 yuan/tonne, an increase of 1.87% compared to the previous month.

Malaysia’s palm oil exports increased following the New Year. According to independent inspection agency AmSpec, Malaysia’s palm oil exports from January 1 to 20 totaled 892,428 tonnes, an increase of 8.64% compared to the 821,442 tonnes exported during the same period last month. Combined with increased inventory, Malaysia’s palm oil stocks by the end of December increased by 7.58% compared to the previous month. Long and short positions overlap, making the Malaysian palm oil market susceptible to fluctuations in the external market. The domestic palm oil futures market fluctuated largely in response to market conditions, with Chinese inventories at approximately 750,000 tonnes of palm oil, up more than 1% from the previous month. Terminal demand was average, and the spot palm oil market grew by nearly 2%.

Analysts believe that final demand is moderate, and continued inventory pressure will weigh on future palm oil market growth.

Tags: prices, palm oil, supply and demand balance