Crude Palm Oil Weekly Report – July 27, 2014

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Malaysian palm oil futures ended lower on profit-taking ahead of long holiday. Meanwhile, electronic soybean oil price traded lower during the Asian trading hours which also added some selling pressure. Futures Crude Palm Oil (FCPO) benchmark October 2014 contract settled at 2,265 which was down 43 points or 1.86  per cent from 2,308 last Friday.

Trading volume decreased to 155,374 contracts from 186,437 contracts totalled last week.

However, open interest based on Thursday increased to 218,886 contracts from 218,692 contracts last Thursday. On Monday (July 21, 2014), Intertek Testing Services (ITS) reported an increase of 7.8  per cent for the first 20 days of July to 868,843 tonnes compare to June’s first 20 days at 806,303 tonnes.

Societe Generale de Surveillance (SGS) also reported an increase of 10.6  per cent to 864,258 tonnes for the first 20 days of July compare to last month at 781,546 tonnes. Palm oil exports are able to maintain at the positive figure due to China import palm oil nearly double compare to the same period in June.

According to ITS, European Union, India and China have imported 205,100 metric tonnes, 195,220 and 166,230 metric tonnes respectively. However, good export reports released by ITS and SGS failed to support the FCPO prices on Monday.

On Friday (July 25, 2014) Intertek Testing Services (ITS) reported an increase of 3.4  per cent for the first 25 days of July to 1,165,306 tonnes compare to June’s first 25 days at 1,126,927 tonnes.

Meanwhile, SGS released its export report showed that Malaysia palm oil exports fell 1.6  per cent to 1,078253 metric tonnes for the first 25 days of July compared to last month’s 1,096,146 metric tonnes.

The FCPO prices extended its losses and the lowest it touched for the week was 2,247, dragged down by bearish external factors such as forecasts for an excellent soybean harvest and soybean oil prices continue to head down which pressured the FCPO prices to fall further.

However, traders expect Malaysia palm oil inventory and output to continue dropping due to an increase in palm oil export released by ITS and SGS recently.

Also workers who are working in plantation will take leave for the Muslim festival celebration next week. In addition, Malaysia announced it would keep its crude palm oil export tax for August at 5  per cent, same as a month earlier.

Meanwhile, Indonesia also announced its export tax for crude palm oil unchanged at 10.5  per cent on Thursday (July 24, 2014). However, the FCPO price snapped its losses after it fell to as low as 2,247 and it started to rebound on Thursday due to CBOT soybean oil price traded high after US Department of Agriculture reported that ending July 17, the export sales for the week approached 100 million bushels.

 

Technical View  

The reversal signs mentioned in the previous weekly report failed to establish as it stayed below the 2,287 level.

Hence, the previously mentioned condition has been negated. As we can see from the chart,  FCPO prices started to fall on Tuesday, with the lowest point throughout the week at 2,247. The second downside gap left at 2,260 was fully covered.

Based on the daily chart, the FCPO price retreated on Friday after it rebounded to as high as 2,294 from 2,247.

Traders have decided to reduce their positions and booked some of their profits due to the coming long holiday weekend coupled with exports starting to fall. There is a high possibility it may cover the upside gap at 2,350 if the FCPO price is able to break and close above the two minor resistance levels which are at 2,295 and 2,315.

However, if the price is unable to break the above said levels, it may fall back and the support levels at 2,247 and 2,210-2,200 will be eyed. Overall, the market action remains negative until the trend is able to build up higher low.

 

Major fundamental news this coming week

ITS and SGS report – July 31, 2014 (Thursday).

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.