Crude Palm Oil Weekly Report – November 15, 2014

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Malaysian palm oil futures edged lower on Friday to 2,204, due to crude prices hovering near four-year lows, paired with investors being cautious before the release of export data in the coming week.

Futures Crude Palm Oil (FCPO) benchmark January 2015 contract settled at 2,204, up nine points or 0.41 per cent from 2,195 last Friday.

Trading volume decreased to 168,094 contracts from 203,969 contracts from last Monday to Thursday.

Open interest based on decreased to 884,108 contracts from 898,845 contracts from last Monday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during November 1 to 10 increased 1.3 per cent to 400,614 tonnes compared with 395,532 tonnes during October 1 to 10.

Another cargo surveyor, Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during November 1 to 10 decreased 0.17 per cent to 295,249 tonnes compared with 395,940 tonnes during October 1 to 10.

Demand from the US and EU fell, while demand increased from China and India.

Spot ringgit weakened on Friday to 3.346, due to data showing the economy grew at its slowest price this year in the third quarter, according to Reuters.

The Malaysian Palm Oil Board (MPOB) report showed that production in October fell by 0.22 per cent, while exports were better than predicted; falling 1.39 per cent from September. End stocks climbed 3.66 per cent to 2.166 million tonnes as productivity remained strong, while imports increased by 115 per cent.

The India’s food ministry has planned to double the import tax on crude edible oils and increase the refined oils by 50 per cent.

If this recommendation is passed, this could hurt Malaysian and Indonesian palm oil exporters as India imports around 60 per cent of its 18 to 19 million tonnes annually demand from these countries.

Initially, the price rose, due to export data showing overseas demand increasing, coupled with investors covering short positions before the US Department of Agriculture (USDA) release reports on grains acreage.  The price continued to climb, due to the weakening ringgit to a four-year low paired with expectations of a drop in output, and strengthening in soy markets.

The price then fell, giving up gains made in previous session, due to technical correction. The price continued to drop, due to falling prices in competing soy markets, coupled with investors closely watching crude prices as they approach a four-year low.

The price fell lower by the end of the week, due to crude prices hovering around levels that hit a four-year low, coupled with investors preparing for weak export data.

 

Technical analysis

According to weekly FCPO chart, the candlestick formed was a gravestone doji, indicating investors are uncertain of the market direction. In the coming week, the price could continue to range between middle and top bollienger band.

According to the daily FCPO chart, the price climbed, testing resistance line 2,240, closing below, while breaking above middle bollienger band.

The price continued to rise, closing above resistance line 2,240. Then price then fell, giving up gains made in previous session, testing resistance line 2,290, and closing below.

The price then fell, closing below resistance line 2,240, while testing middle bollienger band. The price continued to drop, testing psychological level 2,200, closing above, while breaking and closing below middle bollienger band.

In the coming week, the price has potential to range between 2,220 and 2,100.  Resistance lines will be placed at 2,240 and 2,290, while support lines will be positioned at 2,150 and 2,110, these will be observed next week.

 

Major fundamental news this coming week

ITS and SGS report on November 17 (Monday) and November 20(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.