KUALA LUMPUR (Oct 13): TA Securities Holdings Bhd said the El Nino weather phenomenon and ringgit would be crucial factors driving Malaysian crude palm oil (CPO) prices.

In a note today, TA said the near-term bull factor for CPO prices would be weather.

"If a strong El Nino materialises, stocking up activity could boost CPO price towards the end of the year," TA said. At 12.16pm today, CPO for December 2015 delivery rose RM16 to RM2,273 a tonne.

TA's note was in response to the Malaysian Palm Oil Board (MPOB)'s September 2015 industry figures.

MPOB said September palm oil inventory rose at a slower pace of 5.46% on month to 2.63 million tonnes as exports grew amid CPO output decline.

According to MPOB, exports of palm oil, comprising CPO and processed palm oil, grew 4.36% to 1.68 million tonnes. CPO output declined 4.48% to 1.96 million tonnes.

Today, TA said MPOB's September data showed that month-end palm oil stocks rose to an all-time high of 2.63 million tonnes, but below consensus estimates of 2.7 million tonnes.

Looking ahead, TA said the ringgit-US dollar exchange rate would influence Malaysian CPO's global competitiveness. A stronger ringgit will make Malaysian CPO costlier for international buyers.

TA said the recent CPO price correction was largely due to the stronger ringgit.

Today, the ringgit was traded at 4.1915 against the US dollar compared to the weakest point at 4.4812 over the last one year on Sept 29 this year.

"A strong ringgit is negative for CPO price, especially given that CPO discount to soybean oil has narrowed to US$78 per tonne. A significant gain in the ringgit will translate into lower CPO price to remain competitive.

"The recent CPO price correction (about 8% from peak on Sept 29) was largely due to the stronger MYR (which strengthened by almost the same magnitude). Expect the near-term volatility to continue. Our current CY15 CPO price estimate is at RM2,266/tonne," TA said.

Kenanga Investment Bank Bhd foresees CPO trading at between RM2,100 and RM2,400 a tonne.

In a note today, Kenanga said CPO prices would hinge on prices of rival soybean oil and substitute hydrocarbon-based fuel.

"CPO prices are likely to be capped by soybean oil prices while gas oil prices should be supportive due to CPO's alternative use as biodiesel. Hence, based on the rolling standard deviation of both gas oil and soybean oil, we expect CPO prices to trade between RM2,100–RM2,400 per tonne," it explained.