Crude Palm Oil Weekly Report – August 15, 2015

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TA01135Malaysian palm oil futures climbed higher on Friday to 2,025, tracking overnight trading of comparative oils higher, as a falling ringgit offered some support to the commodity.

Future Crude Palm Oil (FCPO) benchmark October 2015 contract settled at 2,025 on Friday, down 17 points or 0.8 per cent from 2,042 last Friday.

Trading volume increased to 186,770 contracts from 176,579 contracts from last Monday to Thursday.  Open interest based on increased to 811,542 contracts from 805,819 contracts from last Monday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS), reported that exports of Malaysia’s palm oil products during August 1 to 10 increased 57.6 per cent to 498,993 tonnes compared with 316,492 tonnes during July 1 to 10.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during August 1 to 10 increased 57.5 per cent to 486,451 tonnes compared with 308,875 tonnes during July 1 to 10.

Demand rose from the EU as they more than tripled imports of palm oil for the first 10 days of this month compared with the previous month. Demand also strengthened from China, India, and Pakistan, while demand weakened from the US.

Spot ringgit weakened on Friday to 4.0750, after earlier touching the lowest in 17 years, as crude oil prices fell below US$42 a barrel. The ringgit’s strength correlates with crude oil prices as the commodity forms a crucial component of the Malaysian economy.

The Malaysian Palm Oil Board (MPOB) reported, on Monday, that Malaysian palm oil stocks in July dropped 5.6 per cent to 1.6 million tonnes, on weaker demand after Ramadan, when communal feasting after full days of fasting drives up edible oil consumption. Malaysian palm oil inventories increased 5.3 per cent to 2.26 million tonnes, the highest since November after production climbed in the world’s biggest supplier after Indonesia. Malaysian palm oil production increased 2.9 per cent to 1.81 million tonnes, the highest since October, as the increase came mainly on higher production in Peninsular Malaysia and Sarawak as output from Sabah fell.

On Monday, the price fell, extending losses into the seventh week as traders remained cautious due to trade and production data, despite signs that shipments from the world’s second-largest producer increased this month.

On Tuesday, the price rose, after the ringgit weakened to a fresh 17-year lows, but remained not far off their 11-month troughs as recent data showed tepid demand for the edible oil, traders said.

On Wednesday, the price fell, due to concerns demand from key buyer China could decline after the nation devalued its currency, and as prices of rival soy-oil dropped.

On Thursday, the price rose the most in more than 3 weeks, after initially touching the lowest in 11 months, due to tracking a recovery in the soy market as buyers were tempted back after by market weakness.

On Friday, the price climbed higher for the second consecutive day, while tracking overnight trading of comparative oils higher, coupled with a weakening ringgit.

 

Technical analysis

According to the weekly FCPO chart, the price opened above the bottom Bollinger band and support level at 2,010, while the SO entered oversold territory.

By the end of the week, the price tested the bottom Bollinger band and the psychological barrier at 2,000, closing above.

According to the daily FCPO chart, on Monday, the price opened above the bottom Bollinger band, while the SO continues to remain within oversold territory.

By the later session, the price closed above the bottom Bollinger band.

On Tuesday, the price opened above the bottom Bollinger band, while an upside gap was formed from 2,130 to 2,155, which may be covered in the near term.

By the later session, the previous gap was covered, as the price closed above the bottom Bollinger band. The SO remained in oversold territory, while daily volume was above normal. A bearish hanging man candlestick was formed, indicating that there could be potential for reversal in the near term.

On Wednesday, the price opened above the bottom Bollinger band, and support level 2,010. By the later session the price tested support level at 2,010 and the psychological barrier at 2,000, closing below. Daily volume remained above the normal daily average.

On Thursday, the price opened below psychological barrier 2,000, and above the bottom Bollinger band.

A downside was formed from 1,975 to 2,000, which might be covered in the near term or might indicate a potential continuance of downtrend, while the SO remained in oversold territory.

By the later session, the previous session gap was covered, while the price tested the support level at 2,010, closing above.

On Friday, the price opened below the support level at 2,010, and above the psychological barrier at 2,000 and the bottom Bollinger band.

By the later session, the price tested support level at 2,010, closing above, while the SO exits oversold territory. The daily volume was double the normal average daily volume.

This coming week, the price has potential to range between 2,000 and 2,200.

Resistance lines will be placed at 2,050 and 2,110, while support lines will be positioned at 1,990 and 1,950, these levels will be observed this coming week.

 

Major fundamental news this coming week

ITS and SGS report released on August 17 (Monday) and August 20 (Thursday).

 

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.