Malaysian palm oil futures edged lower in thin volume on Friday to 2,118, as traders expect edible oil prices would continue to recover from its three-month low in the previous session, and following data which showed exports have dropped less than anticipated in July.
Future Crude Palm Oil (FCPO) benchmark October 2015 contract settled at 2,118 on Friday, down 60 points or 2.83 per cent from 2,178 last Friday.
Trading volume increased to 172,267 contracts from 105,020 contracts from last Monday to Thursday.
Open interest based decreased to 621,460 contracts from 728,576 contracts from last Monday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during July 1 to 25 decreased 17.7 per cent to 1.152 million tonnes compared with 1.4 million tonnes during June 1 to 25.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during July decreased 6.4 per cent to 1.544 million tonnes compared with 1.649 million tonnes during June.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during July 1 to 25 decreased 15.4 per cent to 1.179 million tonnes compared with 1.393 million tonnes during June 1 to 25.
SGS’ report showed that Malaysia’s palm oil exports during July decreased 9.2 per cent to 1.696 million tonnes compared with 1.696 million tonnes during June.
Overall, demand rose from China, and the US, while demand weakened from the EU, India and the rest of the sub-continent.
Spot ringgit weakened on Friday to 3.8230, and it has reached a 16-year low, as a political scandal linked to a state investment company and the slump in oil weighed on investors’ sentiments.
Indonesia has issued a regulation that changes the way export taxes are calculated for crude palm oil and other palm products, a Finance Ministry official said on Tuesday, with amounts due now expressed in dollars rather than a percentage of the price.
The tax revision is intended to help offset the costs exporters must pay alongside the new US$50 export levies that came into effect this month.
Indonesia is expected to face moderate El Nino weather conditions from July to November, affecting provinces from Sumatra to eastern Indonesia, the National Disaster Mitigation Agency (BNPB) said on Tuesday.
On Monday to Wednesday, the price fell for the sixth consecutive day, touching the lowest in three months, as traders sold positions after data showed exports declined this month, and as competing oil markets weighed on prices.
However, a weakening ringgit provided some support.
On Thursday, the price rose, after earlier touching a new three month low, tracking vegetable oils, as traders waited for fresh cues and monthly export data which is due soon.
On Friday, the price edged lower in thin volume, as traders bet edible oil prices would continue to recover from its three-month low seen in the previous session, and after data showed exports fell less than expected in July.
Technical analysis
According to the weekly FCPO chart, the price opened below the middle Bollinger band, and within sideways range at 2,135 to 2,185.
By the end of the week, the price tested psychological barrier 2,100, closing above, and within sideways range.
According to the daily FCPO chart, on Monday, the price opened above the bottom Bollinger band, and within the previous sideways range.
A downside gap was formed from 2,155 to 2,175, which may be covered in near term or indicate downtrend towards psychological barrier 2,100.
By the later session, the price closed within the sideways range, and tested the lower Bollinger band, closing above.
The previous gap was unable to be covered, while daily volume was above the average.
On Tuesday, the price opened above the bottom Bollinger band, and within sideways range.
By the later session, the price tested sideways support level at 2,135, closing below, and the price tested the bottom Bollinger band, closing above.
The SO entered oversold territory, while the previous day gap was unable to be covered indicating a potential downtrend in the near term.
On Wednesday, the price opened above the bottom Bollinger band, and within sideways range.
By the later session, the price tested support level at 2,110 and the bottom Bollinger band, closing above, while the SO remained in oversold territory.
In the earlier session, the price tested the Fibonacci retracement level 50 at 2,150 (from April 29 to May 13), and the price was unable to break above, causing the price to the rebound lower. Daily volume was above the average.
On Thursday, the price opened above the bottom Bollinger band, and support level 2,110.
By the later session, the price tested the psychological barrier at 2,100, and the bottom Bollinger band, closing above support level at 2,110.
On Friday, the price opened above the bottom Bollinger band, and above the support level 2,110.
By the later session, the price tested the support level at 2,110, closing above, while the SO remains in oversold territory.
In the coming week, the price has potential to range between 2,130 and 2,200. Resistance lines will be placed at 2,190 and 2,250, while support lines will be positioned at 2,090 and 2,050, these levels will be observed.
Major fundamental news this coming week
No upcoming fundamental news this coming week.
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.