Malaysian palm oil futures ended lower on Friday despite their biggest weekly gain in four week as investors booked profits from a near three-week high in the previous session on Thursday.
Meanwhile, palm oil futures were lifted by a weak local currency which made the ringgit-priced feedstock cheaper for overseas buyers and refiners.
The new benchmark crude palm oil futures (FCPO) April contract settled at RM2,591 per tonne on Friday which was up by 51 points from last Friday at RM2,540. The trading range for the week was from RM2,587 to RM2,604.
Total volume traded for the week amounted to 163,589 contracts which increased by 46,509 contracts compared to last Friday’s 117,080 contracts.
Open interest as of Thursday totalled 172,119 contracts which was an increase of 5,345 contracts from 166,774 contracts from the previous Thursday.
On Monday, Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products from January 1 to 20 fell 15.3 per cent to 748,303 tonnes from 883,575 tonnes shipped during December 1 to 20.
Meanwhile, Cargo surveyor Societe Generale de Surveillance (SGS) reported exports of Malaysian palm oil products for January 1 to 20 fell 15.5 per cent to 743,487 tonnes from 879,596 tonnes shipped during December 1 to 20.
Sluggish exports for most of January had raised worries that Malaysian stocks would remain elevated at their current levels of 1.99 million tonnes.
According to a trader, market sentiments were talking about a possible total export of 1.35 million tonnes and that probably will make stock levels remain the same.
On other news, Malaysian Palm Oil Association (MPOA), forecasted that the country’s palm oil output in the first twenty days of January fell nearly 11 per cent as yields from top palm-producing state Sabah weakened.
Meanwhile, a senior official from the Malaysian Palm Oil Board said on Thursday that palm oil stocks in Malaysia could be lower and range between 1.6 million and 1.8 million tonnes at the end of this year, as growing demand for the tropical oil outstrips bigger output.
The industry regulator had previously pegged stocks to stand at 1.76 million tonnes at end of 2014 which was lower than the 1.99 million tonnes piled up at the end of 2013.
Exports of Malaysian palm oil were seen at 18.5 million tonnes for the full 2014 which was below earlier estimates of 19.94 million tonnes but higher than 18.12 million tonnes exported in 2013.
Malaysia’s ringgit had weakened even further to 3.333 against the dollar on selling from offshore funds including real money accounts, while the central bank was suspected of intervening to limit losses.
The ringgit also possibly have been hit by worries over China’s slowing economy and an expected cut in the US Federal Reserve’s stimulus.
Technical View
From the chart, price rebounded even further to test the 2,605 range but it failed to break and close above it.
Currently, we drew a resistance line to be monitored where should price break and close above it; price may rise further and retest the 2,690 level.
If it fails to do so, we expect the first support to be at 2,560-50.
For the coming week we pegged our important support levels at 2,560, 2,485 and 2420 Meanwhile, for our resistance levels, we pegged important ones at 2,605, 2,670 and 2690
Major fundamental news this coming week
ITS and SGS Export reports – January 25 (Monday December 27).
Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us 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.