Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives were choppy in two-sided trade this week, weighed down by the poor global economic data but were supported by the tightness in the global edible oils supplies.
The benchmark FCPO July contract rose RM5 or 0.14 per cent to close at RM3,505 per tonne on Friday from RM3,500 per tonne last Friday.
The trading range for the week was from RM3,448 to RM3,522. Total volume traded for the week amounted to 116,537 contracts, down 33,096 contracts from the previous week.
The open interest as at Thursday increased to 123,053 contracts from 116,476 contracts the previous Thursday.
The PMI Manufacturing in Germany released on Monday signalled further contraction in their factory output, pointing to a slower growth in its economy which may reduce the demand for the commodities.
In addition, the PMI Manufacturing in China released early this week was showing the same signal as in Germany while the US gross domestic product in the first quarter of 2012 released later of the week indicated slower growth than expected.
However, the robust export demand for US soybeans and the anticipation of lower South American’s soybean production continued to underpin the palm oil market. Oil World, an oilseeds analyst based in Germany, said on Tuesday that the soybean production in Argentina was further cut by 1.5 million tonnes to 42.5 million tonnes due to drought damage.
Meanwhile, the Malaysian palm oil exports demand continued to show improvement in the first 25 days of April.
Cargo surveyor ITS released the palm oil export figures for the period of April 1 to 25 on Wednesday at 1,037,083 tonnes, a drop of 2.97 per cent while another surveyor SGS at 1,034,849 tonnes, a decline of 1.92 per cent from the same period last month.
The top palm oil importers including China, European Union countries and India were seen picking up in their demand for palm oil in April compared with March.
However, the bullishness in the edible oils market was limited with the uncertainties in the debt issues hovering in the eurozone area.
Standard and Poor’s cut its credit rating on Spain by two notches from A to BBB+ with a negative outlook on Thursday, indicating more efforts needed to be done by the eurozone governments to resolve the debt issues in their countries.
The palm oil production in April would be monitored closely next week as to determine the palm oil stock level and the supply situation in the coming months.
Some traders expected the palm oil production in April would recover and increase slightly instead of falling after the lower production period from December to March.
The Malaysian market will be closed on Tuesday celebrating Labour Day.
Technical View
The benchmark July contract continued consolidating this week within our trading range of RM3,445 to RM3,532.
We believed the market would not move much next week as China market would be closed two days on April 30 and May 1 celebrating Labour Day while most of other countries would be closed on Tuesday as well for Labour Day.
Resistance would be pegged at RM3,700 to RM3,735 while support was set at RM3,445 to RM3,465.
Major fundamental news this coming week
Malaysian export data for the full month of April by ITS and SGS on April 30.
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.