Palm Oil Demand Boosted As Rival Oil Prices Jump On Supply Woes
As the price disparity between palm oil and soyoil, as well as sunoil, has widened due to recent increases in rival oil prices driven by production concerns in the US and supply disruptions from the Black Sea region, the demand for oil has been on the rise, according to industry officials.
This increased demand is anticipated to assist Indonesia and Malaysia in reducing their oil inventories, which in turn will provide a boost to Malaysian palm oil futures (FCPOc3).
Sanjeev Asthana, CEO of Patanjali Foods Ltd, India’s leading palm oil buyer, stated that aggressive pricing has been a key factor driving the shift towards palm oil from other oils for near-month shipments.
India, being the world’s largest edible oil buyer, witnessed a substantial increase in oil imports in July, reaching 1.09 million metric tonnes.
This marked a nearly 60% rise from June and the highest volume in seven months. Asthana expects India’s robust imports to continue through August and September.
In terms of oil prices, crude oil is currently being offered at $910 per tonne (including cost, insurance, and freight) for September shipments to India.
This is notably lower than the prices for crude soyoil and crude sunflower oil, which are $1,050 and $1,010 respectively. The recent surge in soyoil prices can be attributed to production concerns in the US and reduced supplies from Argentina.
Additionally, sunflower oil became more expensive after Russia withdrew from the Black Sea grains deal. The Black Sea region is a significant contributor to global sunflower oil production and exports.
Contrary to the price increases in rival oils, oil prices have remained stable and even declined due to rising stocks in producing countries.
This trend has made palm oil even more appealing to price-sensitive Asian buyers, who have traditionally favored palm oil due to its affordability and quick shipping times.
Countries like China, Bangladesh, and Pakistan, alongside India, have been increasing their oil purchases for shipments in August and September.
In July, China’s vegetable oil imports, predominantly consisting of palm oil, surged by 48% compared to the previous year, reaching 778,000 tonnes.
The current discount to other oils is projected to gradually decrease as rising exports help to reduce inventories in both Malaysia and Indonesia. Malaysia’s oil exports witnessed a 15.55% growth to 1.35 million tonnes in July, as reported by the Malaysian Palm Oil Board.
Additionally, the first ten days of August saw a 17.5% rise in exports of Malaysian oil products, according to AmSpec Agri Malaysia.