Friday 29 Mar 2024
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BALI (Nov 26): Malaysian crude palm oil (CPO) prices could see support at around RM2,347 a tonne next year on lower Indonesian oil palm output and higher biodiesel demand there.

CIMB Investment Bank Bhd analyst Ivy Ng said the Indonesia Estate-Crop Fund (IECF) for palm oil, with an annual US$700 million (RM2.96 billion) budget, is seen as a catalyst for Indonesia's biodiesel development.

"CPO price will be supported or trend higher due to higher demand from expanded biodiesel usage in Indonesia and/or lower supply from the replanting of older estates," Ng said at the Indonesian Palm Oil Conference 2015 here today.

Malaysian CPO for Jan 2016 rose RM37 to RM2,255 a tonne as at 3.05pm today, Bloomberg data show.

Ng's estimate is based on crude oil price at US$50 a barrel and 90% usage of the IECF's financial resources toward biodiesel development.

"This could be a game changer for CPO price if Indonesia's biodiesel demand manages to exceed expectations of 2.5 million to 3.5 million tonnes of biodiesel in 2016 and reach blue sky scenario of 7 million tonnes," she said.

The IECF, established last July, aims to promote sustainable palm oil, biofuel development, and smallholder oil palm planters' welfare.

IECF chief executive Bayu Krismurthi said, "The funds that go toward biofuel development will be much bigger than the other purposes."

"This year, we only started collecting from July. So, by the end of 2015, we collect US$350 million from palm oil exporters. In 2016, we think we can collect US$700 million," Bayu said.

(Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

 

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