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Bursa Malaysia CPO prices hit lowest level since March at MR2,529/mt

http://www.chemnet.com   May 05,2016 Platts
The crude palm oil front-month futures contract on the Bursa Malaysia exchange fell to MR2,529/mt or $644.90/mt on Tuesday, its lowest level since March 15 when it was MR2,525/mt.

The palm oil futures contract was predicted to rise beyond the MR3,000/mt mark, on production worries caused by El Nino-related drought affecting parts of Malaysia and Indonesia, during the POC 2016 Conference held early March in Kuala Lumpur, Malaysia.

The front-month contract rose above the MR2,700/mt mark a few times in March and April, and hit a high of MR2,733/mt on April 5. It, however, has yet to breach the MR 2,800/mt resistance level.

DBS palm oil analyst Ben Santoso, citing the bank's technical analysis, said the support level for spot palm oil was pegged at MR2,400/mt.

Despite currently declining CPO futures prices, Santoso expects the levels to rise in the next couple of months to around MR2,860/mt, adding that palm prices were "taking a breather right now."

Santoso remained bullish on palm prices into the third quarter of 2016 because he expects to see a drop in Malaysian inventories on production woes and in Indonesian stocks because of state-owned Pertamina's new biodiesel allocation for the Indonesian B-20 blending mandate in April.

There should be "some surprises out of Malaysia," added Santoso, as northern and peninsular Malaysia, which are still in the throes of an extended drought would have greatly reduced production.

Although Chinese palm oil purchases have been surprisingly high during the past few months, Santoso believes that this demand was in anticipation of lower palm oil availability and that Chinese buyers remained committed to buying more soybeans.

He also felt that Chinese demand for palm oil would decline in the coming months.
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