Palm oil prices fell 5.4%, despite lower forecasts for production, exports and stocks

The Malaysian Palm Oil Board (PMOB) report and USDA's FAS vegetable oil balance sheet for December, which downgraded estimates for palm oil production, exports and stocks, sent prices sharply lower as traders expected a much bigger cut.

According to the Ministry of Internal Affairs and Communications, in November, crude palm oil production in Malaysia fell by 9.8% to the lowest level since 2020 at 1.62 million tons, exports by 14.7% to 1.49 million tons, and reserves by 2, 6% to 1.84 million tons (-9.2% in two months), which is the lowest indicator of the last 4 years.

January palm oil futures on Malaysia's Bursa exchange fell 5.4% in two sessions to 4,856 ringgits/t, or $1,096/t, completely losing the speculative gains of the previous two weeks. They were not supported even by USDA's FAS forecasts of reduced production in Malaysia and lower exports from Malaysia and Indonesia in FY2024/25.

USDA experts lowered the palm oil production forecast by 0.55 to 79.629 million tons (76.26 million tons in FY 2023/24), in particular for Malaysia - by 0.5 to 19.3 (19.71) million tons. The global palm oil export forecast was reduced by 1.4 to 46.58 (44.8) million tons, in particular for Indonesia - by 1 to 24.2 (22.27) million tons due to the increase in domestic processing and for Malaysia - by 0, 4 to 15.9 (16.53) million tons against the background of production reduction. The estimate of world import of palm oil was reduced by 1.4 to 44.58 (42.9) million tons, in particular for China - by 0.75 to 5.15 (4.38) million tons and India - by 0.5 to 9 .4 (8.89) million tons.

Yesterday, oil prices rose by 1.8% to $73.5/barrel (+2.6% for the month) on the background of a reduction in crude oil inventories in the US, a possible increase in demand from China, which announced an easing of credit and monetary policy policies aimed at stimulating the economy, as well as new US sanctions on oil exports from the Russian Federation, which may reduce the volume of world supplies.

Rising oil prices will support biodiesel and vegetable oil prices in the near future, especially amid falling temperatures and increased oil consumption.