Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply higher, boosted by strong gains in soybean oil prices and the ‘turn-around’ sentiment in the global equities and commodities.
The benchmark FCPO December contract surged RM134 or 4.83 per cent to close at RM2,906 per tonne on Friday from RM2,772 per tonne last Friday. The trading range for the week was from RM2,775 to RM2,906. Total volume traded for the week amounted to 112,767 contracts, down 23,012 contracts from the previous week.
The open interest as at Thursday increased to 143,338 contracts from 139,108 contracts the previous Thursday.The Malaysian Palm Oil Board (MPOB) released its monthly reports on Malaysian palm oil’s supply and demand for September 2011 on Monday with palm oil stocks hitting the record high since January 2010.
The palm oil stocks jumped to 2.12 million tonnes in September from 1.886 million tonnes the previous month as production outpaced the export demand. The stocks level was far above the Reuters’ poll median at 1.95 million tonnes.
The palm oil production in September increased to 1.869 million tonnes from 1.667 million tonnes while the exports slipped 8.84 per cent to 1.543 million tonnes.
Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 10 on Monday at 496,918 tonnes, a sharp increase of 31.8 per cent while another surveyor SGS at 486,882 tonnes, a sharp rise of 25.14 per cent from the same period last month.
The US Department of Agriculture (USDA) released its monthly estimation on soybean supply and demand on Wednesday with the soybean crop yield and production was reduced.
The USDA also cut its soybean ending stocks for 2011 and 2012 to 160 million bushels from 165 million previously which was below the market expectation of 183 million. The USDA report was supportive to soybean complex prices thus pushing the prices up in an oversold condition.
The broad gain in soybean complex prices had benefited palm oil prices.
The crucial meeting of eurozone leaders on October 23 and a summit meeting of G-20 leaders in Cannes, France on November 3 and 4 would be the limelight with the focus on the proposals and actions to be taken to tackle the euro-zone debt crisis.
Technical View
The benchmark December contract rebounded strongly from the low this week due to solid soy oil performance despite the high palm oil end stock in September.
The benchmark will change to January contract on Monday with the settlement price at RM2,915 on Friday. With the strong gain in soy oil prices on Friday, the palm oil prices will be easily crossing the RM2,917 resistance level.
However, we expect the price to face a tough resistance at EMA 50 or probably it may cover a small gap at RM2,995 to RM3,004.
With the high end stock level in September, we do not see the price to be able to cross RM3,004 level at this moment. Crossing RM3,004 level will turn the market into bull trend in the medium term.
Nonetheless, the palm oil prices are forming a solid support base at RM2,750 to RM2,800 region. Resistance would be pegged at RM2,967 and RM3,004 while support was set at RM2,818 and RM2,750.
Major fundamental news this coming week
Malaysian export data for Oct 1to 15 by SGS on October 17, Malaysian export data for Oct 1 to 20 by ITS and SGS on October 20.
Market expectation for the export demand for the period of Oct 1 to 15 was 726,000 tonnes.
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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