Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week slightly lower in choppy two-sided trades due to disagreement of the European leaders to the bailout plan on the debt crisis and the anticipation of higher palm oil production in October.
The benchmark FCPO January contract slipped RM23 or 0.79 per cent to close at RM2,883 per tonne on Friday from RM2,906 per tonne last Friday.
The trading range for the week was from RM2,817 to RM2,946.
Total volume traded for the week amounted to 139,259 contracts, up 26,492 contracts from the previous week.
The open interest as at Thursday decreased to 138,673 contracts from 143,338 contracts the previous Thursday.
The meeting of eurozone leaders today (Oct 23) will remain the major focus on how they would solve their debt problems.
However, some sources revealed that there would be no concrete solution during this meeting as there were some disagreements between the eurozone leaders on how to boost the European Financial Stability Facility’s (EFSF) capacity.
To avoid the disappointment in the financial markets on Monday, a second summit meeting on October 26 was announced.
More details would be revealed during the second meeting on Wednesday.
Global equities on Friday were boosted by the increase confidence that the European leaders would be getting closer to a plan to tackle its debt crisis.
On the other hand, traders would be closely monitoring on the palm oil production in October next week.
Some analysts estimated the production in October would increase 10 per cent while the export growth may not be able to catch up with the increase in production.
The export demand would be expected to slow down with India was well-stock ahead of Deepavali festival next Wednesday and a disappointing demand from China after the Golden week holidays.
This would further push up the palm oil stocks from September onwards.
Cargo surveyor ITS released the palm oil export figures for the period of Oct 1 to 20 on Thursday at 1,031,953 tonnes, an increase of 5.51 per cent while another surveyor SGS at 1,033,454 tonnes, a rise of 6.77 per cent from the same period last month.
Indonesia and Malaysia agreed on Thursday that they would review the palm oil export tax structure and would work out the details soon to achieve mutual benefits between the two countries.
Malaysian market will be closed on October 26 celebrating Deepavali festival.
Technical View
The benchmark January contract traded in choppy two-sided trade during the week due to lots of uncertainties in outbound markets.
The market would remain in current trading range until there was a clearer outcome from the eurozone leaders meeting.
However, the palm oil fundamentals were pointed to slightly bearish with higher production and lower demand in coming months.
This was reflected in the contango situation between the near and forward months’ spread.
We expect the price to face a tough resistance at EMA 50 while forming a solid support base at RM2,750 to RM2,800 region.
Resistance would be pegged at RM2,950 and RM3,004 while support was set at RM2,818 and RM2,750.
Major fundamental news this coming week
Malaysian export data for Oct 1 to 25 by ITS and SGS on October 25.
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 resul