Palm oil may average 7.1 percent higher in 2010 than previously forecast, driven by supply shortages and dry weather caused by El Nino, BNP Paribas SA said.
The commodity may average 2,625 ringgit ($549) a metric ton this year, compared with an earlier forecast of 2,450 ringgit a ton, the bank’s Michael Greenall and Helmy Kristanto said today in a report. Prices may reach 2,800 ringgit a ton in the first half, BNP said.
An El Nino weather pattern, which can cause drought in parts of the Asia-Pacific region and Australia, started in May and will be a “significant occurrence,” BNP said. Royal Bank of Scotland Asia Securities (Singapore) Pte. also raised its palm oil forecast this week.
“We believe the current tightness in crude palm oil supply will keep prices firm and, if El Nino develops into a stronger event, crude palm oil and other oilseed price strength would extend into second half 2010,” the BNP report said. The bank expects the strongest prices in the first half of this year.
Still, BNP lowered its forecast for 2011 by 2 percent to 2,500 ringgit a ton, and predicted an average 2,450 ringgit a ton in 2012.
Palm oil for April delivery climbed as much as 0.9 percent today on the Malaysia Derivatives Exchange and traded 0.6 higher at 2,444 ringgit a ton at the 12:30 p.m. local time trading break. Palm oil has gained 37 percent in the past year and averaged 2,230.96 ringgit in 2009.
To contact the reporter on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net
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