Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended unchanged from the previous week in a choppy two-sided movement.
The benchmark FCPO November contract closed unchanged at RM3,050 per tonne on Friday from the previous Friday.
The trading range for the week was from RM2,978 to RM3,076.
Total volume traded for the week amounted to 92,105 contracts, up 72,415 contracts from the previous week.
The open interest as at Thursday increased to 134,634 contracts from 130,395 contracts the previous Monday.
The crude palm oil market started the week lower with concerns over global economic slowdown after the release of disappointing US jobs data the previous Friday.
However, the deteriorating condition of US soy crop limited the downside. The market bounced off the low during midweek due to widening discount between palm oil and soybean oil prices. Traders were also covering their short positions ahead of the release of Malaysian Palm Oil Board (MPOB)’s monthly supply and demand reports this coming Monday in which the palm oil stocks were expected to decline further from the previous month.
A Reuters poll revealed on Wednesday that the Malaysian palm oil stocks in August likely dropped from July as overseas and local demand outpaced the lower production during Muslim festive month.
According to the poll, the palm oil stocks in August were expected to drop 2.3 per cent to 1.95 million tonnes while the production probably fell 2.9 per cent to 1.70 million tonnes.
On the demand side, the exports in August likely declined 4.6 per cent to 1.65 million tonnes, a moderate drop from the record high in July. Indonesia’s trade ministry said on Friday that the new palm oil export tax structure will take effect on September 15 and will soon announce the new export tax rate.
This move had an immediate impact on the Malaysian refiners where they have to re-strategize and sell their products cheaper in order to compete with their Indonesian rival.
US weather was forecasted to bring scattered and light rainfall over the weekend until the following week in the US Midwest crop growing area which will be beneficial to the crops. Temperatures turned moderate and not as hot as previous weeks.
However, some weather forecasters signaled that there may be potential frost in northern US Midwest next week which may be supportive to grain prices.
Technical View
Palm oil prices swung wildly in the past week due to mix fundamental news of worries over global economic crisis and supportive MPOB’s monthly supply-demand reports.
The benchmark November crude palm oil contract attempted to break above RM3,070 resistance for two times during the past week but failed to sustain long above that level.
However, the candle on Friday was finally able to stay above the downtrend channel resistance line. This week will be crucial to confirm whether palm oil market has successfully come out from the downtrend? Any drop below the resistance-turned-support line will void the short term uptrend view.
If the benchmark November contract is able to break above the EMA 50 line, this will give a further boost to rebound to RM3,150 level. Resistance will be pegged at RM3,076 and RM3,150 while support is set at RM3,000 and RM2,917.
Major fundamental news this coming week
MPOB and USDA’s monthly supply-demand report on September 12, Malaysian export data for September 1-10 by SGS on September 12, Malaysian export data for September 1-15 by ITS and SGS on September 15.