Crude palm oil (CPO) prices could decline in 4Q on the back of slightly higher inventory levels, warns RHB Securities.

This is despite the brokerage’s forecast that CPO prices could end the year above RM2,400 per metric tonne.

See also: Maybank KE keeps 2020 CPO price forecast at RM2,300 per metric tonne

“We continue to caution of a possible pullback in CPO prices in 4Q20 from the seasonal peak and post-festive pullback in demand,” the RHB research team writes in a note dated Oct 13.

According to RHB, CPO prices continue to stay elevated for now.

This is likely the result of the buoyancy of soybean and sunflower prices on the back of weather disruptions, it says.

However, the high CPO prices have caused the price gap between CPO and soy oil to narrow to US$15.00 per tonne, making CPO highly uncompetitive.

RHB believes this could result in more substitution going forward.

The brokerage has maintained its “neutral” rating for the plantation sector.