Malaysian palm oil futures edged lower on Friday to 2,311, due to unstable crude oil prices coupled with uninspiring export data showing weak overseas demand. Futures Crude Palm Oil (FCPO) benchmark April 2015 contract settled at 2,311, down 37 points or 1.6 per cent from 2,348 last Friday. Trading volume increased to 234,195 contracts from 181,399 contracts from last Monday to Thursday.
Open interest base increased 701,908 contracts from 671,230 contracts last Monday to Thursday.Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 10 decreased 12.7 per cent to 355,846 tonnes compared with 407,425 tonnes during December 1 to 10.
In a separate report, ITS showed that exports of Malaysian palm oil products during Janaury 1 to 15 decreased 13 per cent to 535,651 tonnes compared with 615,805 tonnes during December 1 to 15.
Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during January 1 to 10 decreased 19 per cent to 320,714 tonnes compared with 395,929 tonnes during December 1 to 10, Another SGS report showed that Malaysia’s palm oil exports during January 1 to 15 decreased 11.8 per cent to 545,410 tonnes compared with 618,134 tonnes during December 1 to 15.
Spot ringgit weakened on Friday to 3.5570, due to the ringgit hitting a new low against the Singaporean dollar, coupled with declining crude oil prices. According to data released by the Malaysian Palm Oil Board (MPOB), palm oil stocks fell 11.6 per cent, to their lowest in five months in December, as monsoon weather slowed production.
Palm oil production fell 22 per cent last month from November to 1.36 million tonnes, their biggest fall in eight years. The drop in output was higher than the predicted 15 per cent by the US Department of Agriculture (USDA). However, overall production through 2014 increased from 19.22 million tonnes in 2013 to 19.67 million tonnes.
MPOB reported that overseas exports increased 0.4 per cent in December from the previous month to 1.52 million tonnes.
The USDA data reported that the US record soybean harvest in 2014 was bigger than expected, boosting supplies to an eight-year high, coupled with a anticipated record harvest in South America.
On Monday to Wednesday, the price stayed within a tight range, the price fell, due to crude oil prices sliding to a six-year low, coupled with weak US and China soy oils markets, and poor export data.
However, the price was supported, due to a weakening ringgit, coupled with concerns of diminishing palm oil supplies as the monsoon weather continues to harm production in key palm oil producing states. On Thursday, the price rose, and tried to break above the tight range, due to crude oil prices rebounding. However, by the later session, the price fell, as crude oil prices were unable to sustain the rebound and fell lower, coupled with worries of decreasing supplies as the monsoon weather continues.
On Friday, the price fell, trying to break below the tight range, due to volatile crude oil prices coupled with export data showing weak overseas demand.
Technical analysis
According to weekly FCPO chart, the price tested the top Bollinger band, closing below.
According to the daily FCPO chart, on Monday to Wednesday, the price stayed within a tight range, unable to test either support line 2,310 or resistance line 2,390, while remaining in overbought territory, and hovering between middle and top Bollinger band. On Thursday, the price rose, testing resistance line 2,390, however it was unable to break and hence, it closed below the line. On Friday, the price fell, testing psychological barrier at 2,300, and eventually closing above support line 2,310, before dropping below overbought territory and towards middle Bollinger band.
In the coming week, the price could continue to range between 2,300 and 2,400. Wait for break below or above either psychological barriers for clearer market direction.
Resistance lines will be placed at 2,350 and 2,410, while support lines will be positioned at 2,260 and 2,210, these will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report on January 20 (Tuesday).
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.