The Malaysian Palm Oil Council (MPOC) is of the opinion that the Russia-Ukraine conflict will remain the single biggest factor in palm oil’s price direction.

Making a virtual presentation on “Key trends and palm oil market direction” as part of “Palm Oil Internet Seminar”, organised by MPOC on Monday, Wan Aisha Wan Hamid, Chief Executive Officer of MPOC, said the conflict between Russia and Ukraine has resulted in a surge in demand for palm oil as it is the most abundantly available. As a result of this, the price of palm oil has increased from $1,640 a tonne on February 25 to $1,990 a tonne on March 2, an increase of 21 per cent.

The shortage of sunflower oil from the Black Sea region due to the Russia-Ukraine war has spurred demand for palm oil and soyabean oil, fanning an already volatile upward momentum in the vegetable oil prices.

Uncertainty over supplies

She said sunflower oil exports from Ukraine were expected to reach 6.6 mt in the 2021-22 season from 5.3 mt in 2020-21. The current conflict will result in lower exports from the region.

Sunflower oil is the world’s third-most traded vegetable oil after palm oil and soyabean. Russia and Ukraine accounted for 77 per cent of the global exports in 2020-21.

She said shipments from Ukraine and Russia were halted following the crisis and buyers are finding it difficult to track their orders creating uncertainty over sunflower oil supplies.

She said the rising uncertainties in the market due to port closure and blockages on vessel navigation are expected to keep prices of vegetable oils elevated in the near term.

Malaysia and Indonesia, which contribute to around 85 per cent of the global palm oil production, will be the focus of international oils and fats trade, she said.

Stating that the palm oil price has been steadily increasing since the third quarter of 2021, she said concerns over the lower than expected production in Malaysia and Indonesia led to this increase.

Price outlook

On the palm oil price outlook, Wan Aisha Wan Hamid said in the short-term it will remain between Malaysian ringgit (MYR) 6,300 a tonne and MYR 6,700 until this month-end.

Stating that the Russia-Ukraine conflict remains the single biggest factor for palm oil, she said if the crisis is not resolved soon the price will likely to remain between MYR 5,700 and MYR 6300 until May in the medium-term.

On the long-term outlook, she said lower than expected supplies, higher demand, volatility of Brent crude oil prices and geopolitical tensions remain factors in determining price direction. “It is forecast that there will be a price correction for all vegetable oils but only towards the end of third quarter of 2022,” she said, adding palm oil will likely be traded between MYR4,500 a tonne and MYR5,500.

India top importer

She said Malaysia exported a total of 2.25 million tonnes (mt) of palm oil to different destinations during January-February of 2022 as against 1.84 mt in the corresponding period of 2021.

Of this, Malaysian palm oil exports to India stood at 4.09 lakh tonnes (lt) during January-February 2022 against 3.08 lt in the year-ago period, an increase of 32.56 per cent. India’s share in total Malaysian palm oil exports was at 18.14 per cent.

Malaysian palm oil exports to Egypt increased by 311.06 per cent and Turkey by 125.96 per cent during January-February of 2022.

On export growth during the first two months of 2022, she said it was mainly because of the increase in demand for Ramazan and Eid festival season, and also due to the disruption in supply from Indonesia.

In addition to this, the anticipated lower availability of other competing oils such as sunflower due to geo-political conflict and soyabean oil due to the inclement weather in South America led to the demand for palm oil.

Production estimate

“In 2022, it is forecast that Malaysian crude palm oil (CPO) production will be at 18.9 mt,” Wan Aisha Wan Hamid said, adding production of CPO should improve as more foreign workers are expected to arrive in the second quarter of 2022. Malaysian CPO production was at 18.1 mt in 2021 and 19.1 mt in 2020.

On the Indonesian CPO production, she estimated it at around 47.1 mt in 2022 as against 45.2 mt in 2021.