Malaysian palm oil futures climbed higher on Friday to RM2,217, due to a weakening ringgit, coupled with gains in competing markets, putting the contract on track for its biggest weekly gain in four months.
Future crude palm oil (FCPO) benchmark August 2015 contract settled at RM2,217 on Friday, up 81 points or 3.80 per cent from RM2,136 last Friday.
Trading volume decreased to 145,524 contracts from 147,097 contracts from last Monday to Thursday.
Open interest based decreased to 672,192 contracts from 696,970 contracts from last Monday to Thursday. Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 25 May increased 52.9 per cent to 1,382,782 tonnes compared with 904,112 tonnes during April 1 to 25.
Another cargo surveyor, Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during May 1 to 25 increased 55 per cent to 1,404,964 tonnes compared with 906,594 tonnes during April 1 to 25.
Overall, demand strengthened from the EU, India and China, while demand weakened from the US.
Spot ringgit weakened on Friday to 3.6640, due to lower oil prices than in April underscored concerns that sliding crude may hurt the country’s trade and fiscal account.
Malaysia is a net oil exporter. Indonesia’s finance minister said the regulation that will force exporters in Indonesia to pay a levy of US$50 per tonne on shipments of crude palm oil, and $30 for processed palm oil, could only come in two weeks after public body that will collect the palm levy is ready.
Indonesia is keeping its export tax for crude palm and cocoa beans unchanged in June, the trade ministry said on Friday.
The export tax for crude palm oil stays at zero per cent. On Monday, the price initially stayed within a tight range, touching a three-week low, due a delay to export levies in the world’s top producer Indonesia.
By the later session, the price rose, eliminating earlier losses, as encouraging export data supported the price.
On Tuesday, the price climbed to the highest in nearly two weeks, rebounding from previous day, due to strengthening overseas edible soyoil markets and strong export data. On Wednesday, the price fell, due to uncertainty about demand, coupled with increasing selling pressure during the later session.
However, a weakening ringgit, which makes the feedstock cheaper for overseas customers, limited losses.
On Thursday and Friday, the price rose to its highest in over two weeks, recovering from previous day losses, due to a falling ringgit, coupled with gains in competing markets and signs that the El Nino weather phenomenon could already be hurting output in East Malaysia.
Technical Analysis
According to the weekly FCPO chart, the price opened below consolidation range RM2,135 to RM2,195 and middle Bollinger band. The price tested middle Bollinger band and psychological barrier RM2,200, closing above.
The middle Bollinger band has been broken for the first time in 11 weeks, indicating that there is going to be a potential uptrend next week.
According to the daily FCPO chart, on Monday, the price opened below consolidation range RM2,135 to RM2,195 and middle Bollinger band. By the later session, the price closed within sideways range.
On Tuesday, the price opened below middle Bollinger band and within sideways range. In the later session, the price closed above middle Bollinger band, while the price tested resistance line RM2,190, closing below. On Wednesday, the price opened above resistance line at RM2,190.
The price tested resistance line to RM2,190, closing below, and within consolidation range. On Thursday, the price opened above resistance line to RM2,190. The price tested psychological barrier RM2,200, closing above. On Friday, the price opened above psychological barrier to RM2,200.
The price tested psychological barrier, closing above. Next week, the price has potential to range between RM2,200 and RM2,300. Resistance lines will be placed at RM2,250 and RM2,310, while support lines will be positioned at RM2,190 and RM2,140, these levels will be observed next week.
Major fundamental news this coming week
ITS and SGS report to be released on June 1 (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.