Malaysian palm oil futures climbed higher on Friday to 2,309, due to expectations of weak output from Indonesia, coupled with investors buying ahead of a key industry conference.
Future Crude Palm Oil (FCPO) benchmark May 2015 contract settled at 2,309 on Friday, up nine points or 0.39 per cent from 2,300 last Wednesday.
Trading volume increased to 139,821 contracts from 80,110 contracts from last Monday to Wednesday.
Open interest base decreased to 592,950 contracts from 625,792 contracts from last Monday to Wednesday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during February 1 to 25 decreased 6.6 per cent to 827,273 tonnes compared with 886,189 tonnes during January 1 to 25.
Societe Generale de Surveillance (SGS) reported that Malaysia’s palm oil exports during February 1 to 25 decreased 7.1 per cent to 827,273 tonnes compared with 886,189 tonnes during January 1 to 25.
Overall, demand decreased due to a steep fall in Chinese import while the European Union and India continued to rise.
Spot ringgit weakened on Friday to 3.6040, due to a higher than expected US durable goods orders and core inflation, along with the Federal Reserve’s comments which increased expectation of higher interest rates. Leverage funds and interbank speculators also sold the ringgit.
According to report from the Malaysian Palm Oil Association (MPOB), the group estimated that crude palm oil production from February 1 to 20 rose 4.5 per cent in Malaysia as weaker yields in the Borneo region were offset by a recovery in Peninsular Malaysian estates.
The manangement of Malaysia’s Sime Darby Bhd said that palm oil prices are likely to hover between RM2,300 and RM2,500 per tonne until June 2015.
On Monday, the prices closed to their lowest level in two and half weeks when the market reopened after the Lunar New Year holiday. This was due to losses in rival soybean oil markets and sluggish export demand which outweighed a drop in the ringgit.
On Tuesday, the price rose, recovering losses from the previous day’s session as weak prices attracted buyers, although poor sentiment from external markets capped gains.
On Wednesday, the price gave up early gains to end lower after a group of growers’ unexpectedly forecast that February yields would pick up and sentiment had further dampened by weak export data and a stronger ringgit.
On Thursday, the price rose, tracking gains in crude markets. However, uncertainty over demand for the vegetable oil and expectation of a recovery in weather impacted yields kept prices within a tight range.
On Friday, the price continued to rise, due to anticipation of weaker output from Indonesia, coupled with investors buying ahead of a key industry meet.
Technical analysis
According to the weekly FCPO chart, the price tested the middle Bollinger band, closing above.
According to the daily FCPO chart, on Monday, the price fell, closing below the middle Bollinger band, after opening below the psychological level at 2,300. On Tuesday, the price initially fell, while testing the support line at 2,220. The price then rebounded in the later session, closing above the middle Bollinger band.
On Wednesday, the price fell, while remaining close to the middle Bollinger band. On Thursday, the price rose, while staying within a tight range. On Friday, the price continued to rise, closing above the psychological level of 2,300.
In the coming week, the price has the potential to range between 2,300 and 2,400. Resistance lines will be placed at 2,350 and 2,410, while support lines will be positioned at 2,250 and 2,190, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report on March 2 (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.