The Oil Markets are Firming Up – 27th July 2023

Palm oil futures in Malaysia are currently hovering around MYR 4,100 per tonne, which is close to the five-month high reached earlier this week.

Malaysia’s palm oil exports during July 1-20 rose 19% from the previous month, as reported by cargo surveyor Intertek Testing Services. Another cargo surveyor, AmSpec Agri, also reported that exports from the world’s second-largest producer rose 10.1%.

This price surge is due to a global rally in vegetable oils that followed Russia’s decision to suspend its participation in an agreement that allowed Ukraine to transport its grain through Russian ports in the Black Sea.

The suspension of this agreement has disrupted an important system that previously helped to prevent a global food crisis.

Ukraine is known as “Europe’s breadbasket,” as it contributes around 10 percent of the world’s wheat exports and almost 50 per cent of the global supply of sunflower oil. The majority of Ukraine’s grain exports, approximately 90 per cent, are shipped from ports located on the Black Sea, which the Russian Military is now targeting.

In India, palm oil imports are expected to jump 46% to a seven-month high of 1 million in July, while purchases of edible oil are set to climb to a record of 1.86 million metric tons, nearly 60% more than normal, as refiners raised purchases to build stocks for several festivals this month.

Despite these challenges, traders remain hopeful about strong demand in the second half of the year due to predicted lower production in Malaysia and top producer Indonesia during Q3 of 2023.