Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week lower weighed by the uncertainties looming in the euro-zone countries and the bearish outlook by the analysts during a palm oil conference in Mumbai, India.
The benchmark FCPO August contract fell RM33 or 1.1 per cent to close at RM2,973 per tonne on Friday from RM3,006 per tonne last Friday.
The trading range for the week was from RM2,922 to RM3,039. Total volume traded for the week amounted to 167,373 contracts, up 35,333 contracts from the previous week.
The open interest as at Thursday increased to 98,671 contracts from 98,195 contracts the previous Thursday.
The palm oil market experienced a high volatility this week with the prices rebounded earlier of the week with the overly optimistic sentiment that the US Federal Reserve would have announced a quantitative easing program on Thursday despite the weak economic data released during the week.
However, the palm oil market was hammered down once again after the US Federal Reserve indicated no further easing at the current moment coupled with the bearish outlook from the analysts during a palm oil conference in Mumbai.
One of the top industry analysts, Dorab Mistry said on Thursday during a palm oil conference in Mumbai that palm oil prices may decline to RM2,700 to RM2,800 per tonne due to the euro-zone debt crisis and may recover to RM3,300 per tonne thereafter as the low prices and the weak palm oil production growth in Indonesia and Malaysia this year may spur the demand for the tropical oil again.
Another renowned analyst, James Fry also painted a bearish view on palm oil prices during the conference on Friday where he linked the Brent crude oil and crude palm oil prices together.
He said that the palm oil prices might decline to RM2,450 per tonne in the fourth quarter 2012 if Brent crude oil prices fell to US$80 per barrel while palm oil prices might hover at RM2,800 per tonne if Brent crude oil prices traded at US$95 per barrel.
China government surprisingly announced on Thursday evening to cut the interest rate by 0.25 percentage point for the first time since 2008.
Some analysts commented this move by the China government might indicate further slowdown in the world’s second largest economic growth.
A Reuters poll revealed on Wednesday that Malaysian palm oil stocks in May were expected to reduce 2.9 per cent to 1.79 million tonnes.
Meanwhile, the palm oil exports were estimated to increase five per cent to 1.4 million tonnes while the production would rise 6.9 per cent to 1.36 million tonnes.
Next week would be a crucial week as a lot of fundamental reports to be released, the outcome from the meeting among the euro-zone leaders and the market sentiment towards the coming election in Greece.
Technical View
The benchmark August contract seemed supported above our support level at RM2,917.
With the daily candles formed for the week, we believe the market has possibility to rebound to RM3,083 in the coming weeks provided RM2,917 support level still holds.
Resistance would be pegged at RM3,083 and RM3,190 while support was set at RM2,917 and RM2,820.
Major fundamental news this coming week
Malaysia Palm Oil Board’s monthly supply-demand report on June 11, Malaysian export data for June 1-10 by ITS and SGS on June 11, USDA’s monthly supply-demand report on June 12 and Malaysian export data for June 1-15 by ITS and SGS on June 15.
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.