FCPO Daily Chart Source: OPF Charting System
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives extended another sharp gain this week due to anticipation of slower production growth in coming months despite bearish news on debt crisis from the eurozone.
The benchmark FCPO February contract jumped RM113 or 3.6 per cent to close at RM3,248 per tonne on Friday from RM3,135 per tonne last Friday.
The trading range for the week was from RM3,157 to RM3,270.
Total volume traded for the week amounted to 189,236 contracts, up 76,092 contracts from the previous week. The open interest as at Thursday decreased to 127,263 contracts from 136,363 contracts the previous Thursday.
Dorab Mistry, a famous global edible oils analyst, said on Sunday during a conference in Guangzhou, China that La Nina weather would bring more rains to Malaysia and Indonesia in coming months, hence slowing down the production growth and harvesting progress.
He revised his estimation slightly lower from the earlier forecast for both Malaysian and Indonesian palm oil production in 2011 to 18.8 million and 25.2 million tonnes respectively.
He forecasted the crude palm oil prices to surge to RM3,300 per tonne in January and maintained his earlier view that crude palm oil prices would rise to RM4,000 by mid-year in 2012.
However, another analyst James Fry had a different view from Mistry.
He said on Thursday during a conference in Kuala Lumpur that he expected the Brent crude oil prices to fall by June 2012 due to rising supply which may pull down the crude palm oil prices as well.
He anticipated a possible global economic recession next year to be the main driver to depress both crude oil and crude palm oil prices.
The persistent eurozone debt crisis kept haunting the global equities and commodities this week with Spain was in the limelight now after Greece and Italy issues.
Bond yields in European countries soared to record high in alarming situation which might spread the debt contagion out of control in eurozone, causing the performance in global equities for the past week to not be in good picture.
Cargo surveyor ITS released the palm oil export figures for the period of November 1 to 15 on Tuesday at 801,463 tonnes, an increase of 10.48 per cent while another surveyor SGS at 802,917 tonnes, a rise of 11.58 per cent from the same period last month.
Technical View
The benchmark February contract posted another strong gain during the week and briefly hit above our resistance level at RM3,250.
The market swung wildly for the past week with total daily volume hit above 40,000 contracts most of the week.
However, the price had risen too fast and steep without significant retracement since the rally began in early November.
Open interest was reduced 9,100 contracts for the week showed profit taking was in place at high prices.
The market is due for a correction anytime this week on the back of uncertainties from Europe before another rally occurs.
Strong support would be placed on EMA 200. Resistance would be pegged at RM3,270 and RM3,336 while support was set at RM3,164 and RM3,094.
Major fundamental news this coming week
Malaysian export data for Nov 1-20 and Nov 1-25 by ITS and SGS on November 21 and 25 respectively hit above 40,000 contracts most of the week.
However, the price had risen too fast and steep without significant retracement since the rally began in early November.
Open interest was reduced 9,100 contracts for the week showed profit taking was in place at high prices.
The market is due for a correction anytime this week on the back of uncertainties from Europe before another rally occurs.
Strong support would be placed on EMA 200. Resistance would be pegged at RM3,270 and RM3,336 while support was set at RM3,164 and RM3,094.
Major fundamental news this coming week
Malaysian export data for Nov 1-20 and Nov 1-25 by ITS and SGS on November 21 and 25 respectively.
Oriental Pacific Futures is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. They can be reached 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.