Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher due to technical buying and weaker ringgit despite lower export demand and bearish USDA soybean report.
The benchmark FCPO November contract surged RM28 or 0.92 per cent to close at RM3,078 per tonne on Friday from RM3,050 per tonne last Friday.
The trading range for the week was from RM2,989 to RM3,087. Total volume traded for the week amounted to 91,385 contracts, down 719 contracts from the previous week. The open interest as at Wednesday increased to 141,333 contracts from 134,634 contracts the previous Thursday.
The Malaysian Palm Oil Board (MPOB) released its monthly reports on Malaysian palm oil’s supply and demand for August 2011 on Monday with palm oil stocks continuing to fall from the previous month.
Palm oil stocks reduced to 1.884 million tonnes in August from 1.996 million tonnes the previous month. The stock level was much lower than the Reuter’s poll median at 1.95 million tonnes. Palm oil production in August also dropped to 1.667 million tonnes from 1.751 million tonnes while the exports fell 2.71 per cent to 1.688 million tonnes.
Cargo surveyor ITS released the palm oil export figures for the period of September 1 to15 on Thursday at 648,343 tonnes, a sharp decrease of 32.03 per cent while another surveyor SGS at 652,766 tonnes, a sharp fall of 31.11 per cent from the same period last month.
According to SGS, the drastic drop in the export demand was mainly because India, European Union and Pakistan had imported 56 to 73 per cent less compared with the previous month.
The US Department of Agriculture (USDA) surprised the market by releasing a bearish report on soybean production and yield estimation on Monday. USDA increased its soybean production estimate by 0.95 per cent at 3.085 billion bushels from the August report while it raised the soybean yield to 41.8 bushels per acre from 41.4 bushels.
Most analysts forecasted a drop in soybean production with yields at around 41 bushels per acre. Indonesia’s trade ministry said on Thursday that it would maintain the crude palm oil export tax at 15 per cent for the remaining of September.
US weather in Midwest was forecasted to freeze over the weekend but the temperatures would turn warm during the first half this coming week.
Weather was less damaging than earlier forecasted and not much effect on soybean crop and yield at this moment. The Malaysian market was closed on Friday in conjunction with the celebration of Malaysia Day.
Technical view
Palm oil prices were volatile in the past week swinging from negative to positive during the week. The firm closing for the week showed benchmark November contracts had successfully broken up from the downtrend channel.
This confirmed the current trend has changed to neutral with upward bias. The buying momentum was seen gaining strength during the past week with RM3,000 support level holding quite well.
Currently, palm oil prices will continue to face the resistance at EMA 50 when the benchmark changes to December contract on Monday. If the benchmark December contract manages to break and close above EMA 50 resistance line, it will bring palm oil prices to a new trading range of RM3,076 to RM3,150.
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
Malaysian export data for September 1-20 by ITS and SGS on September 20.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my.
Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.