CPO prices increasingly determined by petroleum market – consultant

07 March 2012 13:11  [Source: ICIS news]

KUALA LUMPUR (ICIS)--Crude palm oil (CPO) prices have become increasingly linked to the pricing of petroleum products, an agricultural consultant said on Wednesday.

James Fry, chairman of agribusiness consultancy firm LMC International, added that “supply and demand fundamentals are no longer the determining factor for CPO prices.”

Statistics presented at the Palm and Lauric Oils Conference and Exhibition Price Outlook 2012 in Kuala Lampur, Malaysia, showed that since 2007, vegetable oil and petroleum prices had become increasingly connected, with the prices of palm, soy, and rapeseed oils in Europe all trading in a similar pattern to that set by Brent crude.

With the spread becoming even more aligned recently, Fry suggested that “the price band linking the prices of vegetable oils to those of petroleum products, was still very much alive.”

Concerns over the global economy, coupled with ongoing worries over limited supplies from Iran have pushed prices of Brent crude oil close to $125/bbl.

But although vegetable oil prices are still trading at a premium to Brent, they tend to move after a slight time lag before mirroring crude oil movements.

Fry therefore anticipates the premium of CPO over Brent crude to rise imminently, predicting CPO to peak at Malaysian Ringgit (M$) 3,360/tonne ($1,108/tonne) if crude prices remain at the high levels they are at present.

The Bursa Malaysia CPO March delivery contract, meanwhile, settled at M$3,217/tonne on 7 March.

($1 = M$3.03)

By: Neha Popat
+44 208 652 3214

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