Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week lower in thin trading due to slower palm oil exports demand and improved weather conditions in South America.
The benchmark FCPO April contract fell RM30 or 0.95 per cent to close at RM3,135 per tonne on Friday from RM3,165 per tonne last Friday. The trading range for the week was from RM3,123 to RM3,190.
Total volume traded for the week amounted to 43,505 contracts, down 76,169 contracts from the previous week. The open interest as at Thursday decreased to 108,690 contracts from 111,409 contracts the previous Thursday.
The talks between Greece and the international private creditors continued this week as lots of details needed to be discussed on the debt swap.
During the European finance ministers’ meeting in Brussels earlier this week, they indicated the Greek government would push the private creditors to accept bigger losses of up to nearly 70 per cent cut in the Greek debt value they were holding from the 50 per cent cut which was agreed by the creditors three months ago.
In addition, Fitch Ratings cut the credit rating of five European countries this week following the steps of Standard & Poor’s two weeks back. The euro countries involved were Italy, Spain, Belgium, Slovenia and Cyprus.
The uncertainties and concerns over the eurozone debt crisis were still haunting investors’ mind. However, the market sentiment improved with the announcement that the US Federal Reserve would extend its pledge to keep its interest rates low to at least 2014 from the earlier middle of 2013. This indicated the US policy makers were prepared to take the necessary steps including further monetary easing should the economic condition needed it.
On palm oil fundamental news, the pace of exports demand was much slower due to long break over the weekend celebrating the Lunar New Year. The slowdown in exports was expected to remain for the rest of January and February as there would be a few more public holidays in Malaysia in the coming two weeks. Moreover, February is a short month.
Cargo surveyor ITS released the palm oil export figures for the period of January 1 to January 25 on Thursday at 981,275 tonnes, a drop of 16.92 per cent while another surveyor SGS at 947,401 tonnes, a decrease of 19.90 per cent from the same period last month.
Top importers including China, European Union countries and India were seen reducing their orders from Malaysian suppliers and shifted to the Indonesian suppliers as the cut in export tax by the Indonesian government few months back gave an upper hand to the Indonesian rival.
The Indonesian suppliers were able to offer lower palm oil selling price to the international buyers on the saving in the export tax cut. The Malaysian market will be closed on Wednesday celebrating Kuala Lumpur City Day.
Technical View
The benchmark April contract was trading in a market range of low volume due to the short week. Market is consolidating in a tight range of RM3,100 to RM3,200 currently while waiting for a new catalyst to move the market in either way. Resistance was pegged at RM3,270 while support was set at RM3,080 and RM3,000.
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.