Palm oil prices will trend higher as production will expand at a slower pace while consumption growth will be relatively robust, Fitch Solutions said Tuesday.
Fitch Solutions said in a report that it believed there is an upside ahead in the coming months for palm oil prices and maintained its forecast for palm oil prices to average at 2,300 ringgit (564 U.S. dollar) per tonne this year, the same average level in 2018.
Palm oil prices rebounded in the beginning this year, from the low record in December, driven by the rally in crude oil prices and positive news for palm oil demand such as the decrease in India's palm oil import duty.
Fitch Solutions forecasts global palm oil production to grow at a lower rate of 3.9 percent to 73.2 million tonnes this year. Among them, Malaysia's output will only expand by 2.2 percent to 20.1 million tonnes this year, compared with 4.3 percent growth recorded last year.
The research house also projected global palm oil consumption to grow stronger at 5 percent, the fastest rate recorded since 2014, as biodiesel production growth will accelerate with both Indonesia and Malaysia increasingly supporting the industry.
According to the report, China's palm oil consumption this year is also projected to rise 9 percent year-on-year to 5.57 million tonnes, from 5.11 million tonnes last year.
Fitch Solutions also maintained its view that palm oil prices to average higher at 2,370 ringgit per ton next year as stocks will slowly decrease this year.
