Weekly Crude Palm Oil Report Dec 4 2011

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FCPO Daily Chart Source: OPF Charting System

Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives ended the week slightly lower in thin trading as most traders preferred to stay on the sidelines after the market plunged heavily the previous week while waiting for more cues from the conference in Bali, Indonesia.

The benchmark FCPO February contract slipped RM7 or 0.23 per cent to close at RM3,062 per tonne on Friday from RM3,069 per tonne last Friday.

The trading range for the week was from RM3,011 to RM3,104. Total volume trad­ed for the week amounted to 96,802 contracts, down 41,111 contracts from the previous week. The open interest as at Thursday de­creased to 124,536 contracts from 128,622 contracts the previous Thursday.

Palm oil market contin­ued its downward move­ment at the beginning of the week as favourable weather in South America raised the soybean production and the narrow discount between palm oil and soyoil had further pressured palm oil prices.

The global market sen­timent was immediately lifted when the major cen­tral banks around the world announced on Wednesday that they would take co­ordinated action to boost liquidity in order to ease strains on the global finan­cial system.

Traders would also fo­cus on the outcome and concrete solution to the eurozone debt crisis by the European leaders during the European Summit in Brussels on December 8 to 9.

Dorab Mistry, a famous global edible oils analyst, maintained his earlier view on Friday during a confer­ence in Bali, Indonesia that crude palm oil prices would surge to RM3,300 per tonne by January and would rise to RM4,000 by mid-year in 2012 due to tight supply next year.

Another well-known analyst James Fry also maintained his earlier view on Friday during the same conference that palm oil prices could fall to US$850 per tonne by June 2012 if Brent crude oil dropped to US$79 per bar­rel due to global economic recession.

Cargo surveyor ITS re­leased the palm oil export figures for the full month of November on Wednes­day at 1,532,978 tonnes, a drop of 8.83 per cent while another surveyor SGS at 1,537,556 tonnes, a fall of 8.7 per cent from the same period last month.

Meanwhile, the palm oil production in November was expected to decrease by 15 per cent to 18 per cent due to heavy rains and monsoon season.

The Malaysian Meteoro­logical Department issued a yellow stage warning on Friday that heavy rains were expected to continue till Saturday, December 3 in few areas in Pahang and Johor. This would cause floods in low lying areas.

The two states combined produced about 30 per cent of the total palm oil produc­tion in Malaysia.

Technical view

The benchmark Feb­ruary contract moved sideways in thin trading this week and the total weekly volume was 41,111 contracts lower.

Palm oil market showed reversal signal at the end of the week and we believe RM3,011 was the low for this round of retrace­ment.

We expect the market to start gaining the buying momentum very soon and resume its upward move­ment this week.

Resistance would be pegged at RM3,164 and RM3,270 while support was set at RM3,000 and RM2,917.

Major fundamental news this coming week

Malaysian export data for Dec 1-10 by ITS on December 10 and Reuters poll on palm oil supply and demand for November anytime next week.

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.