Technical Analysis for FCPO, FCPO Daily Chart Source: OPF Charting System
Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives settled the week higher in anticipation of lower palm oil stocks in February.
The benchmark FCPO May contract rose RM80 or 3.38 per cent to settle at RM2,448 per tonne on Friday from RM2,368 per tonne last Friday.
The trading range for the week was from RM2,375 to RM2,451.
Total volume traded for the week amounted to 135,768 contracts, down 61,507 contracts from the previous week.
The open interest as at Thursday decreased to 167,859 contracts from 169,795 contracts the previous Thursday.
The Reuters poll was revealed on Thursday to indicate that the palm oil stocks would probably fall for the consecutive two months based on the survey of five plantation companies in Malaysia.
According to the poll, palm oil stocks could fall 6.1 per cent to 2.42 million tonnes as the drop in production was faster than the fall in demand.
The poll showed that the palm oil production might drop 18.1 per cent to 1.31 million tonnes while the exports fell 14.4 per cent to 1.39 million tonnes.
The industry players would be waiting for the major fundamental reports to be released Monday for guidance on the palm oil stocks level and the impact on exports demand after the 4.5 per cent increase in export tax for crude palm oil in March.
Earlier this week, most traders and industry players were away from their desks and headed to the annual palm oil conference in Kuala Lumpur.
The conference was carried out successfully and attended by nearly 2,000 participants from over 55 countries globally.
Analysts were giving mixed signals on the price direction of edible oils in 2013 to 2014.
Focus was paid to two of the top analysts, James Fry and Dorab Mistry’s papers.
Fry was more on the bullish side as the current low palm oil prices were very attractive to produce palm methyl-ester as fuel without substantial subsidies from the government.
The demand for palm methyl-ester could improve substantially which may ease the high level of palm oil stocks.
He added that palm oil prices were to trade at RM2,625 per tonne if Brent crude oil prices hovered at US$105 per barrel by June.
Meanwhile, another analyst Dorab Mistry, was also supportive of palm oil prices in mid-term but was bearish on a long term basis.
He tipped that palm oil prices should be trading at the range of RM2,300 to RM2,500 per tonne until end of April.
Thereafter, the palm oil prices might fall to RM2,200 or lower after April due to the increase in soybean supply from South America.
Technical View
The benchmark May contract rebounded this week mainly on short covering as some of the top analysts were not as bearish as initially thought.
If the palm oil prices are able to hold above RM2,428 level, there are high chances that the palm oil prices may cover the big gap left behind on February 25, 2013.
Resistance would be pegged at RM2,476 and RM2,527 while support was set at RM2,428 and RM2,332.
Major fundamental news this coming week
MPOB’s monthly supply-demand report on March 11, Malaysian export data for March 1 to 10 by ITS and SGS on March 11 and the export figure for March 1 to 15 by ITS and SGS on March 15.
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my
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