CPO futures end higher in anticipation of tight supply

KUALA LUMPUR (Jan 10): Crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives closed higher today mainly driven by the prospect of lower production and strong demand from investors.

Statistics from Malaysian Palm Oil Board released today showed that palm oil production in December 2019 fell 13.27 percent to 1.334 million tonnes.

This is the third consecutive month of decline as production also decreased 3.94 per cent in October 2019 and 4.08 percent in November 2019.

Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varqa said the anticipation of higher exports also buoyed demand for the golden fruit.

Meanwhile, cargo surveyor Intertek Testing Services reported that Malaysia's palm oil exports in the Jan 1-10 period increased 29.8 percent to 468,871 tonnes from 361,220 tonnes shipped during the same period in December 2019.

Similarly, cargo surveyor Amspec Malaysia stated that exports in the Jan 1-10 period rose 24 percent to 455,592 tonnes from 367,410 tonnes shipped during the same period in December 2019.

"Lower production prompted higher imports as Malaysian refiners have to buy CPO from Indonesia to refine into the downstream products,” Sathia told Bernama today.

At the close, the CPO futures contract for January increased RM23 to RM3,131 per tonne, February climbed RM22 to RM3,145 per tonne, while March gained RM24 to RM3,134 per tonne, and April rose RM27 to RM3,110 per tonne.

Volume slipped to 44,684 lots from 57,834 lots on Thursday, while open interest declined to 279,059 contracts from 291,626 contracts previously.

On the physical market, January South ended at RM3,140 per tonne today.