FCPO Daily Chart Source: OPF Charting System
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower due to persistent worries on eurozone debt crisis, slower export demand and the higher than expected Malaysian palm oil stocks data.
The benchmark FCPO March contract declined RM100 or 3.24 per cent to close at RM2,984 per tonne on Friday from RM3,084 per tonne last Friday.
The trading range for the week was from RM2,971 to RM3,063. Total volume traded for the week amounted to 102,438 contracts, up 12,636 contracts from the previous week. The open interest as at Thursday decreased to 117,601 contracts from 118,592 contracts the previous Thursday.
The Malaysian Palm Oil Board (MPOB) released its monthly reports on Malaysian palm oil’s supply and demand for November 2011 on Tuesday with palm oil stocks declining for the second consecutive month.
Palm oil stocks reduced to 2.069 million tonnes in November from 2.1 million tonnes the previous month as the drop in production outpaced the fall in exports demand. Last week, Reuter’s poll estimated the palm oil stocks to decrease to 1.96 million tonnes.
Exports fell 9.94 per cent to 1.66 million tonnes while the palm oil production in November slumped 14.76 per cent to 1.627 million tonnes.
The higher than expected palm oil stocks occurred mainly due to the palm oil imports in November was nearly doubled compared to the previous month.
Cargo surveyor ITS released the palm oil export figures for the period of December 1 to 15 on Thursday at 668,385 tonnes, a drop of 16.6 per cent while another surveyor SGS at 649,138 tonnes, a decrease of 19.15 per cent from the same period last month.
Some meteorologists forecasted dry conditions in Argentina were likely to worsen and extend to next week. Persistent dryness would remain in Argentina until the mid of January.
However, Brazil would get some rain next week but dryness was developing thereafter until the end of the month.
This weather condition would potentially reduce the South America’s corn and soybean production if there was no rainfall in near term.
The Malaysian Meteorological Department issued a yellow stage warning on Friday that moderate heavy rains were expected to fall in few areas in Pahang and Johor until December 19. This may cause flood in low lying areas.
In addition, scattered thunderstorms and heavy rains were expected to occur in most of the Peninsular Malaysia and East Malaysia’s states including key producing states such as Perak, Johor, Sabah and Sarawak until the night of December 16.
This condition may cause strong winds and flash floods. The four states combined produced more than 70 per cent of the total palm oil production in Malaysia.
Technical View
With the recent palm oil price movement, the market seemed to be forming a descending wedge.
This type of chart pattern usually is a consolidation phase of the current uptrend. We expect this chart formation may drag for another two weeks before any breakup from this pattern.
The support and resistance of the wedge will be monitored closely as shown in the chart. Resistance would be pegged at RM3,040 and RM3,080 while support was set at RM2,960 and RM2,917.
Major fundamental news this coming week
Malaysian export data for Dec 1-20 by ITS and SGS on December 20.
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.