Crude Palm Oil 3-month forward contract price chart points to consolidation within a tight range but with downside bias. In the immediate term, CPO price is likely to move at the lower end of MYR2,040 (Nov 2018 low) and MYR2,170 range.
Downward pressure on price will remain as uncertainty with regard to EU policy on banning crude palm oil in biodiesel and the anticipated deceleration in global consumption due to sluggish economic growth continue to weigh on sentiment. This negative price trend may be mitigated by the affirmative action undertaken by governments of both Malaysia and Indonesia, the world’s largest producers, to reduce record high stock piles and drive demand but the impact and resulting effect may be insufficient to maintain a meaningful, sustained rebound.
While a consolidation phase is expected in the immediate term, it is anticipated that in order to avoid any retaliation or outright boycott of products from the EU by both Malaysia and Indonesia, there is likely to be amenable solution that that does not unfairly discriminate palm oil.
If the EU adopts this accommodative stance, there is a strong likelihood that CPO prices may reverse their multiyear declining trend and rebound to test its resistance at MYR2,300 (recent peak). Beyond this, crude oil palm prices may well be on a sustained uptrend to around MYR2,750.