The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade on a slightly upward bias on the back of a strong export performance.
In July, palm oil exports rose by 15.6 per cent to 1.35 million tonnes from 1.17 million tonnes previously, while preliminary data by Intertek Testing Services showed exports for Aug 1-10 period increase by 5.88 per cent to 395,145 tonnes.
AmSpec estimates exports at 383,795 tonnes, up 17.52 per cent from July 1-10 period.
Palm oil trader David Ng told Bernama that prices may trade between a high of RM3,900 and a low of RM3,600 this week.
Nevertheless, he said worries over stocks may limit price uptrend following the higher production period currently, which is set to only peak in October or early November.
On a positive note, Hong Leong Investment Bank believes the stockpile will likely remain flattish in August amid higher export demand.
It said palm oil's improved price competitiveness over soybean oil will give a boost to palm oil exports.
At the same time, soybean oil prices are likely to remain higher due to production concerns mainly in top exporting Argentina.
For the week just ended, the CPO futures were traded mostly lower, tracking the soybean oil futures on the Chicago Board of Trade and owing to concerns over rising domestic palm oil inventory.
On a weekly basis, August 2023 fell RM55 to RM3,727 per tonne, September 2023 declined RM123 to RM3,703 per tonne, and October 2023 slid RM142 to RM3,717 per tonne.
November 2023 edged down RM143 to RM3,739 per tonne, while December 2023 and January 2024 dipped RM156 each to RM3,759 per tonne and RM3,792 per tonne respectively.
The total weekly volume widened to 288,950 lots from 272,747 lots in the preceding week and open interest decreased to 198,125 contracts from 262,411 contracts previously.
The physical CPO price for August South declined RM100 to RM3,750 per tonne.
Meanwhile, the Malaysian rubber market is expected to see quiet trading this week as fears of slowing growth in China and the United States (US) continue to chip away at regional sentiment amid a string of weak economic prints from both countries.
Concerns over their trade relations also saw a resurgence after US President Joe Biden issued an executive order restricting some US investment in Chinese technology to protect national security and prevent capital and expertise from aiding China's military modernisation.
The Malaysian Rubber Glove Manufacturers Association (Margma) past president, Denis Low, said China was dealing with deflation as its July consumer price index (CPI) fell 0.3 per cent amid signs of a decrease in demand for Chinese-made products.
"This means less economic activity and less rubber consumption from the world's largest rubber user. It may take some time for demand to be back to normal," he told Bernama.
In addition, China also saw imports and exports shrank more than expected in July, their fastest pace since May 2020 at 12.4 per cent and 14.5 per cent, respectively.
Investors also showed mixed reactions over the latest US CPI, which saw a year-on-year increase of 3.2 per cent, surpassing the 3.0 per cent seen in June.
While inflation remained sticky, this was also meaningful as the US Federal Reserve might ease up on its monetary policy to support future growth.
At home, recent data also showed that local rubber production was on an uptrend, which would likely impact price movements.
Malaysia's natural rubber (NR) production jumped by 23.8 per cent to 29,867 tonnes in June 2023 from 24,126 tonnes in May 2023.
Nevertheless, total NR stocks decreased by 5.4 per cent to 159,742 tonnes in June 2023 from 168,806 tonnes in May 2023, as exports surged 31.8 per cent to 48,857 tonnes in June 2023 from 37,062 tonnes in the previous month.
"Hence, it is expected to be another mute week with prices and demand remaining at rangebound with a slight bias tendency of moving up," Low added.
Throughout the week, the local rubber market mainly traded higher in muted trading.
The Malaysian Rubber Board's (MRB) reference price for Standard Malaysian Rubber 20 (SMR 20) increased by 1.21 per cent or 7.0 sen to 584.0 sen per kilogramme (kg) from last week's 577.0 sen per kg, while latex-in-bulk slipped 5.5 sen to 474.5 sen per kg from 480.0 sen per kg previously.
At 5 pm yesterday, the MRB's reference price for physical rubber SMR 20 stood at 587.0 sen a kg, while latex-in-bulk was at 471.5 sen a kg.
Read more at NST