Malaysian palm oil futures were pressured lower on Friday to 2,189, as the price eased further from its five-week highs recorded earlier in the week, but strong export data provided support.
FCPO benchmark for August 2015 contract settled at 2,189 on Friday, up 27 points or 1.23 per cent from 2,162 last Friday.
Trading volume decreased to 137,338 contracts from 137,934 contracts from last Tuesday to Thursday. Open interest based on Thursday decreased to 540,985 contracts from 551,315 contracts from last Tuesday to Thursday.
Intertek Testing Services (ITS), reported that exports of Malaysia’s palm oil products during May 1 to 10 increased 41.3 per cent to 458,677 tonnes.
ITS reported that of Malaysia’s palm oil products exports during May 1 to 15 increased 54.5 per cent to 737,308 tonnes.
Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during May 1 to 10 increased 44.9 per cent to 464,520 tonnes compared with 320,508 tonnes during April 1 to 10. It showed that Malaysia’s palm oil exports during May 1 to 15 increased 56.1 per cent to 733,613 tonnes compared with 470,058 tonnes during April 1 to 15.
Overall, demand strengthened from the EU, China and India. Spot ringgit strengthened on Friday to 3.562, as a rally in crude prices eased concern that the oil-exporting nation’s trade balance will worsen.
Malaysia’s economy posted 5.6 per cent growth in the first quarter, beating forecasts and just a tad slower than the previous quarter, as it showed resilience in the face of weak global prices for energy and commodity exports.
According to a report by the MPOB, palm oil output in April rose 13.3 per cent, palm oil end-stocks in April increased 17.6 per cent, and palm oil exports in April fell 0.6 per cent.
Overall, accelerating crude palm oil output continued to outpace export demand.
Malaysia will keep its crude palm oil export tax for the month of June at zero per cent.
Indonesian crude palm oil output likely rose 11 per cent in April to its highest since September, a survey of leading industry officials showed, while Indonesian crude palm oil exports climbed 14 per cent in April. Palm oil might climb should an El Nino weather pattern increase dry conditions across Southeast Asia, hurting production. The palm oil market could go under pressure due to the dry spell in palm oil trees which can typically only be seen nine to 12 months later.
Prices may advance to RM2,500 per metric tonne over the next three months, Maybank Investment Bank Bhd analyst Ong Chee Ting said in a report.
On Monday and Tuesday, the price rose, due to encouraging export data which showed strong demand at the beginning of this month, paired with a weakening ringgit.
However gains were capped, as investors were concerned over a higher than expected end-stocks figure.
The price initially rose, touching the highest in five weeks, due to worries of the El Nino weather. The price later fell, eliminating earlier gains.
On Thursday, the price rose, as anticipation over strong export data supported the price. On Friday, the price eased further from its five-week highs on Wednesday, but strong export data provided support.
Technical analysis
According to the weekly FCPO chart, the price opened and closed within previous week consolidation range of 2,135 to 2,195. The price tested middle Bollinger band and psychological barrier 2,200, closing below, and the SO exited oversold territory.
According to the daily FCPO chart, on Monday, the price opened and closed within the previous week consolidation range, while testing psychological barrier 2,200, closing below. The SO entered overbought territory. The price tested resistance line 2,220 and top Bollinger band, closing above.
On Wednesday, the price tested resistance line 2,220 and top Bollinger band. By the later session, the price closed below psychological barrier 2,200 and within consolidation range.
On Thursday, the price opened within consolidation range. By the later session, the price tested psychological barrier 2,200, closing above.
Later, the price opened above psychological barrier 2,200. By the later session, the price closed below psychological barrier 2,200 and within consolidation range. The SO exits overbought territory.
In the coming week, the price has potential to range between 2,100 and 2,250.
Resistance lines will be placed at 2,250 and 2,310, while support lines will be positioned at 2,140 and 2,090, these levels will be observed next week.
Major fundamental news this coming week
ITS and SGS report released on May 20 (Wednesday).
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.