The CPO price broke a record RM 4,125 per tonne

ILLUSTRATION. The price of CPO continues to climb, touching the highest price record since more than five years ago.

Reporter: Danielisa Putriadita | Editor: Wahyu T. Rahmawati

KONTAN.CO.ID – JAKARTA. Crude palm oil price or crude palm oil (CPO) continues to climb to touch the highest price record since more than five years ago. The demand for CPO is increasing due to the factor of switching from crude oil to palm oil as fuel.

Quoting Bloomberg, Friday (12/3), the CPO price for the May 2021 delivery contract closed up 1.6 percent to RM 4,125 per ton. Within a week, CPO prices jumped 10.26%.

Traderindo.com founder Wahyu Tribowo Laksono observed that CPO prices rose due to rising demand, especially after the trend of a more environmentally friendly energy mix policy. On the one hand, oil prices also recorded record highs. The increase in the price of crude oil has made the use of biodiesel more competitive.

“CPO is a raw material for making biodiesel and can be used as a substitute for crude oil so that when the price of crude oil rises, the price of CPO also goes up,” said Wahyu, Friday (12/3).

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Apart from the increase in oil prices, the increasing trend of soybean oil prices has also contributed to the increase in CPO prices. Wahyu said the agricultural consultancy AgRural reported that Brazil’s soybean harvest had reached its lowest level in nearly a decade. “So far, market players are concerned about the tight supply of soybean oil in the United States (US),” said Wahyu.

Meanwhile, the main factor supporting the increase in CPO prices came from the economy which began to recover after the distribution of vaccines. Export demand and consumption growth are driving the increase in CPO prices.

In addition, international palm oil prices have increased in succession due to concerns over low stocks in CPO exporting countries due to low production. Not to be left behind, the factors that make CPO prices continue to rise are the Fed’s monetary policy and its impact on the US dollar index. As long as the Fed maintains its policy of low interest rates and the dollar index weakens, commodity prices can be lifted.

Also Read: Oil prices have stabilized at around US $ 64 per barrel this week

However, along with the increase in demand for CPO, it will also respond to the increase in supply. The Indonesian Palm Oil Association (GAPKI) projects that Indonesia’s CPO production this year will increase by 3.5 percent on an annual basis to 49 million tons from last year’s realization of 47.4 million tons. “The increase in supply could be a barrier to prices and prone to correction at high levels,” said Wahyu.

However, the sentiment for the strengthening of CPO prices, Wahyu projects, will continue. Positive sentiment came from Pertamina, which has tested production green diesel. The test uses refined, bleached, and deodorized palm oil (RBDPO).

In the first stage, Pertamina will process 3,000 barrels of RBDPO per day to produce green diesel starting next December. Meanwhile, in the second stage, Pertamina will process even more, namely 6,000 barrels of CPO per day into green avtur starting December 2022.

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Technically, Wahyu observed that after the CPO price passed RM 3,681 it would indeed trigger bullish. The RM 4,000 level is subject to testing. For the first quarter of 2021, Wahyu projects a CPO price range at RM 3,500-RM 4,100.

Furthermore, at the end of this year the CPO price range is projected to be at RM 3,000-RM 4,500.

Also Read: The Ministry of Industry encourages the palm oil industry to enter the European market