Crude Palm Oil Weekly Report – August 22, 2015

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C_PC0007485Malaysian palm oil futures edged lower on Friday to 1,986, due to worries about higher production, slowing import demand in China and a global commodities rout.

Future Crude Palm Oil (FCPO) benchmark November 2015 contract settled at 1,986 on Friday, down 39 points or 1.9 per cent from 2,025 last Friday.

Trading volume increased to 196,922 contracts from 186,770 contracts from last Monday to Thursday.

Open interest based on increased to 853,949 contracts from 811,542 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 15 increased 7.47 percent to 715,922 tonnes compared with 666,132 tonnes during July 1 to 15.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during August 1 to 20 increased 9.3 per cent to 991,862 tonnes compared with 907,574 tonnes during July 1 to 20.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during August 1 to 15 increased 9.8 per cent to 729.834 tonnes compared with 664,641 tonnes during July 1 to 15

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during August 1 to 20 increased 9.2 per cent to 990,835 tonnes compared with 907,627 tonnes during July 1 to 20

Overall, demand rose from the EU, while demand weakened from China, and the US.

Spot ringgit weakened on Friday to 4.173 hitting a fresh pre-peg 17-year low as investors await foreign exchange reserves data amid concerns about how much ammunition the central bank has to defend the embattled currency.

Malaysia, the world’s second-largest palm grower after Indonesia, will keep its crude palm oil export tax for September at zero per cent, extending duty-free exports from August, a government circular showed.

On Monday, the price fell, extending last week’s losses when it touched an 11 month low, while staying within a tight range due to concerns of oversupply as stockpiles continue to rise, coupled with weaker prices for rival soyoil.

On Tuesday, the price rose, after touching the highest in more than two weeks, as the weakening ringgit continued to provide support. However declines in competing markets dragged on appetite for the edible oil.

On Wednesday, the price fell, retreating after hitting a two week high during the previous session, as weak crude and competitive vegetable oils weighed on prices of the tropical oil ahead of export data due out later this week.

On Thursday, the price declined for a 2nd consecutive day, as weakness in global commodity markets put pressure on vegetable oil prices.

On Friday, the price fell for a third successive day, set to post their longest weekly losing streak since 1999, and heading for an eighth consecutive weekly loss, due to worries about higher production, slowing import demand in China and a global commodities rout.

Technical analysis

According to the weekly FCPO chart, the price opened above the bottom Bollinger band.

By the end of the week, the price tested the bottom Bollinger band and psychological barrier at 2,000, closing below, while the SO remained in oversold territory.

According to the daily FCPO chart, on Monday, the price opened above the bottom Bollinger band, while an upside gap was formed from 2,025 to 2,045, which may be covered in the near term or indicate that the price may test the middle Bollinger band and the psychological barrier at 2,100 in the near term.

By the later session, the previous gap was covered, while the price closed above the bottom Bollinger band, and the SO exited oversold territory.

Daily average volume was double the daily normal average volume. A doji candlestick was formed, indicating market players await further catalysts to establish market direction.

On Tuesday, the price opened and closed above the bottom Bollinger band.

The price may test the middle Bollinger band and psychological barrier at 2,100. Daily volume was above the average.

On Wednesday, the price opened below the middle Bollinger band, while a downside gap was formed from 2,035 to 2,060, which may be covered in the near term or indicate continuation of downtrend as unable to test the psychological barrier 2,100.

By the later session, the price unable to test the middle Bollinger band, while the previous gap was unable to be covered, this may indicate continuance of downtrend towards psychological barrier 2,000.

A doji candlestick was formed, indicating market players remain unsure of the market direction.

On Thursday, the price opened below the middle Bollinger band, while a downside gap formed from 2,015 to 2,035, which may be covered in near term or indicate further downward pressure towards psychological barrier 2,000.

By the later session, the previous gap was unable to be covered, while the price tested support level at 1,990, closing on the psychological barrier 2,000.

On Friday, the price opened and closed above the bottom Bollinger band and psychological barrier at 2,000. By the later session, the price tested the support level at 1,990, closing below, while the SO begins to enter oversold territory. Daily volume was above the normal daily average.

In the coming week, the price has potential to range between 1,950 and 2,070. Resistance lines will be placed at 2,010 and 2,070, while support lines will be positioned at 1,950 and 1,910, these levels will be observed this coming week.

Major fundamental news this coming week ITS and SGS report released on August 25 (Tuesday).

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.