KUALA LUMPUR, July 14 (Bernama) -- Crude palm oil (CPO) prices are likely to trend lower in the second half of 2010, hitting a low of RM2,200 per metric tonne as production peaks in the fourth quarter, says ECM Libra Investment Research.

"This will largely be due to yearly seasonal effects and we do not expect any anomalies (induced by weather) to occur this year," the firm said in its research note Wednesday.

It said the second half of the year is typically when production levels start to rise and a peak is hit in October.

ECM Libra said high stock levels have a tendency to push CPO prices down given the market view of an oversupply situation.

"We believe that the sector is pretty much fully valued and even if CPO prices tapered down to the RM2,200 per metric tonne levels, it would not cause much downside in current valuations.

"All in all, we notice that when CPO prices have a reasonable range, they tend not to cause wild swings in share prices."

Earlier in the year, there had been some concerns that production could be weaker in the second half of the year due to El Nino in the first quarter but now most players agree that effects would be muted as the El Nino was not severe, it added.