As Indonesia relaxes palm oil policy to accelerate exports, Fed rate hikes, and rumors of biodiesel, Malay palm oil prices have fallen sharply. The market expects that Indonesia's export volume will increase, and domestic arrivals will also increase. The problem of tight palm oil supply has been alleviated, biodiesel has also had "big variables", and palm oil futures prices have rebounded rapidly. So what is the current contradiction between palm oil supply and demand? Can several negative lines reverse the super bull market of palm oil?
Indonesia's exports are relaxed, and the supply shortage situation is temporarily suspended
As of June 17, 2022, the spot price of 24-degree palm oil in Guangdong was 15,910 yuan/ton, maintaining stability compared with the previous trading day. From a seasonal perspective, the current spot price of 24-degree palm oil in Guangdong has remained at a high level compared with the past five years.
usda released a global oil and oil supply and demand report on June 11, with soybean production increasing by 2.62 million tons, the output of new soybeans adjusted to increase by 680,000 tons, and the inventory of new production increased by 860,000 tons at the end of the period.
htmlOn June 14, according to Vietnam News Agency, Indonesia's export acceleration will continue until July 31, and the quota for gross palm oil exports may exceed 1 million tons. With the special permit of 500,000 tons, the monthly export volume is expected to be around 1-1.5 million tons. It is expected that this amount of palm oil exports will be within a controllable range as a whole.
Indonesian palm oil price export premium space has declined, and the export volume may not be as large as imagined, and there is certain support for the price of palm oil.
In order to cope with the huge domestic inflation pressure, Indonesia now needs to keep its resources at home as much as possible, and there are also a large number of policy backups behind it: 1. Ensure a large supply of domestic supply, which also includes a large amount of reserves. 2. Increase export tax. 3. Restore local sales rules for the prescribed percentage.
So the effect of Indonesia's accelerated export policy needs further observation.
The Russian-Ukrainian conflict has not ended, and crude oil is hard to say collapse
The Russian-Ukrainian conflict, interest rate hikes and balance sheet reduction and inflation have superimposed, and crude oil and grain prices have soared, thus opening up the profit margin of biodiesel and giving birth to this super bull market for oil.
The historical high price of palm oil includes the premium of crude oil, so the profit margin of biodiesel is also an important factor supporting the palm oil bull market.
There are two recent news in the market that triggered palm oil adjustments: 1. Europe limits crop-based biofuels to less than half of the total biofuel use in transportation, and gradually phases out palm and soy-based biofuels by 2023. This has aroused market concerns about biodiesel; 2. The Federal Reserve's continued aggressive interest rate hikes will lead to an economic recession and lead to a decline in demand for oil.
Interpretation: 1. The European biodiesel reduction plan is expected to have little impact on demand, because Europe's quantity is limited and the crude oil price is high, so there is no need to worry too much about biodiesel. 2. The Fed's interest rate hike has caused market concerns about recession, but the conflict between Russia and Ukraine has not ended, inflation will not end, and crude oil prices will not collapse.
The short-term market is affected by rumors of biodiesel restrictions and Indonesia's accelerated export policies, and negative sentiment spreads. But it may be too early to talk about the turning point now. The conflict between Russia and Ukraine has not been resolved, the food and energy crisis is still there, and the foundation of the oil and fat bull market is still there.
U.S. inflation is out of control, and the conflict between Russia and Ukraine continues. The conflict between Russia and Ukraine will not stop until a critical victory. Crude oil prices may continue to maintain high levels under a tight geopolitical situation. Or if the conflict between Russia and Ukraine does not end, the United States cannot handle Saudi Arabia, OEC, and Iran, and it will be difficult to reduce crude oil prices.
In the context of the fundamental contradiction between crude oil and the price remains high, the impact of global biodiesel will be more emotional, and the real substantial impact will be very small.
1. Crude oil prices fell sharply, and biodiesel logic was shattered. 2. US soybean production exceeded expectations. 3. The Russian-Ukrainian conflict ends. 4. The Federal Reserve raises interest rates, and demand for crude oil and palm oil collapses. Once any of the following situations occur in the market, you need to pay enough attention, because it may mean the arrival of the grease turning point. Please do not waste a crisis at that time.
