Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower due to continuous worries over the eurozone debt crisis which may hinder the global economic growth.
The benchmark FCPO December contract tumbled RM87 or 2.91 per cent to close at RM2,905 per tonne on Friday, from RM2,992 per tonne last Friday.
The trading range for the week was from RM2,850 to RM2,976.
Total volume traded for the week amounted to 138,763 contracts, up 40,387 contracts from the previous week.
The open interest as at Thursday decreased to 131,241 contracts from 135,326 contracts the previous Thursday.
The US Department of Agriculture (USDA) released its grain stocks report on Friday pegging the soybean stocks at 214.7 million bushels, below the market expectation of 225 million bushels.
The soybean stocks number was regarded as neutral but USDA released a very bearish corn stocks report which surprised a lot of traders.
USDA estimated corn stocks at 1.128 billion bushels, above market expectation of 964 million bushels. This report pulled down all major CBOT grain prices on Friday. The German parliament supported the expansion of the euro rescue fund on Thursday but failed to cheer the market up.
The global equities ended the third quarter 2011 with the biggest fall since the economic crisis started in 2008. Economic reports from the countries like China, Germany and US indicated that the global economy was slowing down with the focus being more on how European countries could contain the debt crisis from getting worse.
All these factors would contribute to the slowdown in global commodities demand.
Dorab Mistry, a famous global edible oils analyst, forecasted palm oil prices to trade within the range of RM2,800 to RM3,100 until mid-November during the Globoil conference in India last Sunday. He added that the palm oil prices could increase to RM4,000 by second quarter 2012 due to the possible return of La Nina which could reduce the palm oil production.
Another analyst, Thomas Mielke, said palm oil prices could fall to RM2,850 but the price would likely to increase again in the first half of 2012 as the palm oil production growth would slow down. Cargo surveyor ITS released the palm oil export figures for the full month of September on Friday at 1,520,948 tonnes, a decrease of 6.27 per cent while another surveyor SGS at 1,505,002 tonnes, a drop of 7.12 per cent from last month. The exports data was in line with the market expectation of 1.52 million tonnes.
The Indian government was likely to raise its refined palm oil base price, reacting to the Indonesian government’s move to reduce its refined palm oil export tax to protect the local refining industries.
Technical View
The benchmark December contract broke and closed below RM2,917 support level on Friday, signaling the selling pressure persisted.
The December contract traded mostly below RM2,917 in four out of five days during the week. The palm oil price had successfully broke down from the neutral range of RM2,917 to RM3,150 indicating the downtrend resumed.
The next possible strong support target level would be aimed at RM2,680. Resistance would be pegged at RM2,917 and RM3,000 while support was set at RM2,808 and RM2,680.
Major fundamental news this coming week
No major fundamental reports will be released in the coming week.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my.
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