Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply higher boosted by gains in the global vegetable oils’ prices.
The benchmark FCPO November contract surged RM75 or 2.52 percent to close at RM3,050 per tonne on Friday from RM2,975 per tonne last Friday. The trading range for the week was from RM3,006 to RM3,069.
Total volume traded for the week amounted to 19,689 contracts, down sharply 78,407 contracts from the previous week. The open interest as at Monday increased to 130,395 contracts from 127,529 contracts the previous Thursday.
The crude palm oil market jumped higher in thin trading for the past week due to some short covering activities coupled with the possible tightness in US grain supplies.
Malaysian market was closed from midday on August 29 until September 1 in conjunction with the Hari Raya and Malaysian Independence Day celebration and resumed trading on September 2.
US weather remained the main focus during this period as it will determine the output and yield for both corn and soybean.
The weekly crop progress released by US Department of Agriculture (USDA) on Monday showed that both corn and soybean ratings were down more than expected due to prolonged heat in July and extended to August.
US soybeans will still be vulnerable to weather changes as it is in the pod-setting period currently. Hot weather with few light showers over the weekend is expected. However, the weather was forecasted to change cooler and would remain dry this coming week.
If the weather is not improving in the coming two to three weeks time, the US soybean yield will further deteriorate and production will be lower than the current estimation.
Cargo surveyor SGS released the palm oil export figures for the full month of August on Monday at 1,620,408 tonnes, a half percent drop from July while another surveyor ITS issued the palm oil export data for the same period on Friday at 1,622,731 tonnes, a 0.64 per cent decline from the previous month.
According to SGS, the top Malaysian palm oil importers were China, European Union and Pakistan. These three countries alone had imported nearly 54 percent of the total Malaysian palm oil in August.
Technical View
The benchmark November crude palm oil contract rebounded from last week decline due to US weather concern and a catch-up with the rise in other vegetable oils’ prices. The high of the week touched right on the dot at the resistance level of the downtrend channel. However, the weekly close was still below the resistance level. Total volume traded for the week was thin due to long holidays.
If the benchmark November crude palm oil contract remains above RM3,000 level in the next two weeks or the price is able to break above RM3,070 level this coming few days, then the price will be able to break up from the current downtrend channel and will end the current bear trend. Any break up from the current downtrend channel will push the market further up to RM3,150 level.
Resistance will be pegged at RM3,070 and RM3,150 while support is set at RM3,000 and RM2,917.
Major fundamental news this coming week
Malaysian export data for the period of September 1-10 by ITS on September 10 and US weather development.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives.
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