James Fry: CPO prices to rise in 2019 as inventory falls

LMC International Ltd chairman Dr James Fry

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KUALA LUMPUR (March 6): Crude palm oil (CPO) prices are expected to rise in 2019 on expectations that global palm oil inventory will fall by up to 1.5 million tonnes and as Brent crude oil trades at US$70 (RM286.48) per barrel, according to agribusiness consultancy firm LMC International Ltd chairman Dr James Fry.

Fry said CPO's free on board (FOB) Southeast Asia price is seen at US$620 a tonne.

"Since we start with very high stock levels, we do not expect the premium to regain its long run average, but do expect lower stocks to lift it by US$100 to US$170 by mid-year.

"I believe that the stand-off between US (crude oil) producers and OPEC will leave crude oil trading in a range near US$60 per barrel for West Texas Intermediate (WTI) and US$70 per barrel for Brent," Fry said at the Palm & Lauric Oils Price Outlook Conference & Exhibition 2019 here today.

Fry said as long as Malaysia and Indonesia stick to their respective B20 and B10 biodiesel mandates, world palm oil stocks should fall by one million to 1.5 million tonnes in 2019, amid the usual seasonal stock drawdown until June this year.

Reuters quoted Fry as saying palm oil prices are linked to the crude oil market, due to the growing use of the commodity in making renewable fuels. He said expansion in biodiesel production is also helping to draw down inventories and support prices.

At Bursa Malaysia today, CPO for May 2019 settled RM10 down at RM2,151 a tonne at 12:30pm. May 2019 CPO prices had earlier risen to their highest so far today at RM2,176 a tonne.

Across crude oil markets, Reuters reported prices slipped on Wednesday, as bullish output forecasts by two big US producers and a build in weekly US crude stockpiles outweighed ongoing OPEC-led production cuts. It was reported that international Brent crude futures were at US$65.36 per barrel at 0440 GMT, down 50 cents or 0.8%, from their last settlement, while US WTI crude oil futures were also down 0.8% or 45 cents at US$56.11 per barrel.