Crude Palm Oil Weekly Report – October 18, 2014

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Malaysian palm oil futures climbed higher on Friday to 2,139, due to traders buying back after two consecutive days of losses.

Futures Crude Palm Oil (FCPO) benchmark January 2014 contract settled at 2,139, down 42 points or 1.96 percent from 2,181 last Friday.

Trading volume increased to 161,752 contracts from 121,455 contracts from last Tuesday to Thursday.

Open interest based on decreased to 807,098 contracts from 811,961 contracts from last Tuesday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products on October 1 to 15 decreased 16.5 per cent to 626,482 tonnes compared with 750,425 tonnes on September 1 to 15.

In a separate report, Societe Generale de Surveillance (SGS) said Malaysia’s palm oil exports on October 1 to 15 decreased 15.5 per cent to 621,145 tonnes compared with 735,334 tonnes on September 1 to 15.

Demand from India and China slowed, while demand from the European Union (EU) and the US increased.

Spot ringgit weakened on Friday to 3.2740, due to an announcement by a chief of the central bank suggesting that the country still requires sustaining monetary policy due to uncertain global landscape.

The Malaysian government announced the removal of export tax on crude palm oil would be extended until the end of this year, with the aim of supporting prices and reducing swelling stocks.

A Reuter’s Poll reported that palm oil futures could end the year by two per cent higher than the current price level.

It targeted 2,150, due to a decrease in production, as the incoming monsoon season which is expected to delay harvesting.

At the outset, the price fell, as investors awaited signals on the direction of the market, while supported by a firm ringgit.

The price then rose, due to a delay in the US record soybean harvest, coupled with expectation strong demand from of tax-free CPO exports. This would keep inventories in check. The price dropped further, succumbing gains made in previous session, as export data showed weak demand paired with tracking falling crude and soy oil prices.

The price continued to descend, due to decreasing crude oil prices coupled with investor’s wariness about the record supplies of rival edible oil which could reduce palm oil demand. By the end of the week, the price was able to gain back some losses as traders closed out deals after two days of declining prices. However, gains were limited as investors continued to wait for clear signals on the market direction.

 

Technical analysis

According to weekly FCPO chart, a candlestick formed and was a bearish hanging man. The price seemed to have bounced from the middle bollienger band. If the price breaks below 2,100, the price could again test the bottom bollinger band in the coming weeks.

According to daily FCPO chart, the price initially fell and it continued to hover between middle and top bollienger band.

The price then rose, and remained between middle and top bollienger band. The price fell, breaking below 2,150 support line and testing 2,110 support line, closing above and still below middle bollineger band.

The price continued to fall, testing physiological level 2,100, and closing above support line 2,110. The price subsequently rose, testing support line 2,150 and closing below, while bouncing bottom bollienger band.

In the coming week, the price could range between 2,090 and 2,160. The price could remain sideways until till breaks physiological level 2,100 or 2,200.

Resistance lines will be placed at 2,170 and 2,220, while support lines will be placed at 2,090 and 2,050. These will be observed in the coming week.

 

Major fundamental news

ITS and SGS report on October 20 (Monday).

 

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.