CITIC Futures: Weather concerns support demand optimism, palm oil trend remains relatively strong

On the macro front, the geopolitical situation in the Middle East remains turbulent and volatile, and crude oil is trading in a high-range, oscillating pattern. Attention on El Niño weather has increased, and news from Shanghai SteelLink indicates that Indonesia has issued related documents requiring the mandatory implementation of the B50 biodiesel blending policy in the second half of the year, with palm oil leading gains among oils and fats.

In the case of palm oil, the market has recently been highly focused on the possibility that El Niño could bring extreme weather. The National Climate Center responded that it is expected to enter an El Niño state in May and that an El Niño event of moderate strength or above will form in the summer and autumn seasons, with the current El Niño event expected to last at least until the end of this year. At the same time, experts from the National Climate Center noted that, given the lag in the impact of El Niño, it is still too early to draw definitive conclusions, but related risks are rising significantly.

On the other hand, related Indonesian documents require the mandatory enforcement of the B50 biodiesel blending policy in the second half of the year. Concerns about supply caused by extreme weather, together with expectations for demand growth, have supported a relatively bullish trend in palm oil futures. Looking ahead, market participants should continue to monitor the severity of El Niño weather events and the rollout progress of biodiesel plans.

For soybean oil, support includes expectations of additional export volume stemming from the upcoming negotiations between China and the United States. In March, U.S. soybean crushing companies’ soybean oil inventories fell month-on-month, which has provided some positive momentum for U.S. soybean oil prices. Domestic soybean oil inventories have declined as well, and attention is on how pre-holiday stockpiling may affect the market.

As for rapeseed oil, with abundant global rapeseed production, focus will shift to planting conditions for Canadian rapeseed. In the short term, the trend will follow soybeans. In the domestic market, purchases of ships have increased, rapeseed oil output has risen, and inventories are expected to gradually accumulate. Going forward, attention should be paid to how rapeseed oil import dynamics will affect futures. (CITIC Futures)