Fry: CPO prices may hit RM2,750

KUALA LUMPUR: Crude palm oil (CPO) prices are expected to trade as high as RM2,750 a tonne early next year due to more palm oil-based biodiesel use, said LMC International Ltd chairman Dr James Fry.

"The price gap between crude petroleum and CPO favours more consumption of palm biodiesel," he told the 1,000 delegates at Malaysian Palm Oil Board's (MPOB) International Palm Oil Congress (PIPOC) 2013, here, yesterday. 

Since production of palm biodiesel is profitable, oil companies in Indonesia and Malaysia have started to mop up CPO from the market to blend with regular diesel. 

MPOB data shows that for the first 10 months of this year, biodiesel exports rose sevenfold to 140,676 tonnes from the same period a year ago. 

Fry reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices. 

Yesterday, Brent North Sea crude oil for January rose 18 cents to US$108.24 a barrel. At the same time, the third-month benchmark palm oil futures on the Malaysian Derivatives Market went up RM73 to close at RM2,653 per tonne.

"If Brent crude continues to trade at the current level, I don't see wildly exciting changes in CPO prices. It may well rise in the months ahead to RM2,750 a tonne," Fry said. 

On the prospects of CPO prices surpassing the RM3,000 a tonne-level, Fry replied: "Do bear in mind that there's a limiting factor as there's a major recovery in the supply of soft oils, like sunflower and rapeseed." 

MPOB senior research officer Ramli Abdullah, in his presentation, said Malaysia's CPO production is likely to expand two per cent to 19.1 million tonnes this year. 

"This is on the assumption of normal weather conditions, increased new plantings and more trees maturing and bearing more fruits," he added.