Weekly Crude Palm Oil Report May 20 2012

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Crude palm oil futures (FCPO) on Bursa Ma­laysia Derivatives continuously plunged this week due to the rising fears on the political instabilities and economic uncertain­ties in Greece.

The benchmark FCPO August contract plum­meted RM179 or 5.47 per cent to close at RM3,096 per tonne on Friday from RM3,275 per tonne last Fri­day. The trading range for the week was from RM3,034 to RM3,242.

Total volume traded for the week amounted to 215,950 contracts, up 79,208 contracts from the previous week.

The open interest as at Thursday decreased to 117,925 contracts from 123,267 contracts the previ­ous Thursday.

Greece failed to form a new government on Tues­day after the talks among the five parties who won seats during the May 6 polls broke up and was forced to hold another election again in June.

The recent polls showed the far-left party Syriza was gaining more support from the Greeks which favoured to go against the austerity programmes.

This raised fears among the investors that Greece would end up leaving the eurozone if they refused to comply with the terms of the bailout deal.

The heightening fears lingering in eurozone areas also drove the borrowing costs higher for Italy and Spain which could go out of control if Greece were to exit the eurozone.

China’s central bank cut its reserve requirement ra­tio last Saturday, the third cut since November 2011, to support its economic growth after the recent economic data signalled the world’s second larg­est economy was slowing down.

The continuous nega­tive news released in the market created chaos in the palm oil market for the whole week with trading volumes extremely high due to increase in hedging activities.

The total volume for FCPO hit the record high of 63,019 contracts on Wednesday, surpassing the previous record of 48,741 contracts created last November.

However, dry weather seemed to emerge in US which was currently af­fecting the winter-wheat yield crop in certain states of US.

Traders were closely monitoring the develop­ment of such weather pat­terns and were concerned about the further impact on winter-wheat in the coming weeks.

Cargo surveyor ITS re­leased the palm oil export figures for the period of May 1 to May 15 on Tuesday at 599,044 tonnes, a rise of 0.71 per cent while another surveyor SGS at 564,477 tonnes, a drop of 6.98 per cent from the same period last month.

China and India were notably reducing their palm oil demand while traders were expecting the demand from the Muslim countries to be picking up soon before their fasting month starts in mid-July.

Technical View

The benchmark July contract broke the major support at RM3,270 on Monday, signalling the top of the rally at RM3,628 was established and the market pierced through the ema200 line, showing the market had entered the bear phase now.

The palm oil market probably would have a rebound next week but any price rally might attract a lot of hedge sellers.

Resistance was pegged at rm3,190 and rm3,270 while support was set at rm3,034 and rm2,917.

Major fundamental news this coming week

Malaysian export data for May 1 to May 20 by ITS and SGS on May 21 and the export data for May 1 to May 25 on May 25.

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.