Crude Palm Oil Weekly Report – 18 April 2015

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Malaysian palm oil futures ended higher on Friday to 2,151 as traders closed short positions before the weekend despite gains being capped by a strengthening ringgit.

Future Crude Palm Oil (FCPO) benchmark for July 2015 contract settled at 2,151 on Friday, down 65 points or 1.12 per cent from 2,127 last Friday.

Trading volume increased to contracts 207,126 from 183,754 contracts from last Monday to Thursday.

Open interest based on increased to 711,386 contracts from 703,112 contracts from last Monday to Thursday.

Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during April 1 to 15 decreased 2.9 per cent to 477,295 tonnes compared with 491,727 tonnes during March 1 to 15.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during April 1 to 15 decreased three per cent to 470,058 tonnes compared with 484,453 tonnes during March 1 to 15.

Overall, demand decreased due to a steep fall in India’s import while demand from China and the European Union continued to rise.

Spot ringgit strengthened on Friday to 3.654, as the rallies in crude prices eased concerns that weaker oil price might hurt Malaysia’s current account surplus and increase its fiscal deficit.

According to a government circular, Malaysia will remove its crude palm oil export tax for the month of May against a 4.5 per cent rate imposed in April.

According leading vegetable oil analyst Dorab Mistry, palm prices will likely trade between RM2,100 and RM2,300 until May, cutting an earlier estimate by as much as 16 per cent because of poor demand and slow biofuels take-up.

The US$50 per tonne levy on any crude palm exports shipped at a zero export tax rate was signed by the Finance Minister Bambang Brodjonegoro on Tuesday and will come into effect once signed by President Joko Widodo.

On Monday, the price inched up as weakness in the ringgit and gains in competing vegetable oils encouraged buying.

On Tuesday and Wednesday, the price continued to rise, stretching gains into its fourth day as top grower Indonesia moved closer to laying on levies which might make its palm more expensive for importers.

On Thursday, the price fell for the first time in five days on Thursday as the contract succumbed to the strong ringgit and concerns that demand in April would be weaker than anticipated.

On Friday, the price rose with a thin traded volume as the market remained curious for the Indonesia levies policy while the gains were capped by a strengthening ringgit.

 

Technical analysis

According to weekly FCPO chart, the price continued to test the lower Bollinger Band, eventually closed below the middle Bollinger Band.

According to the daily FCPO chart, the price rose on Monday earlier session, but unable to retain the early session gains, eventually closed one point higher at 2,129.

On Tuesday, the price fell and broke both psychological barrier 2,100 and lower Bollinger Band which indicating oversold condition on early trading session.

The price then well support by psychological level and rebounded in the later session, eventually closed 25 points higher at 2,230.

On Wednesday and Thursday, the price initially fell, attempting to test but unable to break the middle Bollinger Band, eventually closed at 2,168 and 2,147.

On Friday, the price rose, failed to stay above middle Bollinger Band, closed five points lower at 2151 on Friday with a thin traded volume.

In the coming week, the price has potential to range between 2,100 and 2,200.

Resistance lines will be placed at 2,195 and 2,230, while support lines will be positioned at 2,130 and 2,100, these levels will be observed in the coming week.

 

Major fundamental news this coming week

ITS and SGS report on April 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.