Malaysian palm oil futures edged lower on Friday to RM2,132, earlier touching the highest in two months, on sustained buying by traders despite data showing higher production and inventory levels.
Future Crude Palm Oil (FCPO) benchmark November 2015 contract settled at RM2,132 on Friday, up 99 points or 4.9 per cent from RM2,033 last Friday.
Trading volume decreased to 142,925 contracts from 155,673 contracts from last Tuesday to Thursday.
Open interest based decreased to 608,038 contracts from 648,492 contracts from last Tuesday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during September 1 to 10 increased 3.7 per cent to 517,600 tonnes compared with 498,993 tonnes during August 1 to 10.
Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during September 1 to 10 increased 5.9 per cent to 514,972 tonnes compared with 486,451 tonnes during August 1 to 10.
Overall, demand rose from the US to over 25,000 tonnes for the first 10 days of this month compared with 2,000 during the previous month, while demand weakened from the EU, China and the rest of the sub-continent.
Spot ringgit strengthened on Friday to RM4.3150, in thin trading as overnight rebounds in oil prices eased concerns over Malaysian exports of liquefied natural gas and palm oil.
The Malaysian Palm Oil Board (MPOB) report released on Wednesday, showed Malaysian palm oil output in August increased 12.9 per cent from the previous month to 2.05 million tonnes.
Malaysian palm oil end-stocks climbed 10.04 per cent in August from the previous month to 2.49 million tonnes, higher than expected due to slowing Indian demand and as flooding last year delayed planting, industry regulator data showed on Thursday.
Finally, Malaysian palm oil exports in August fell 0.3 per cent from the previous month to 1.6 million tonnes on slowing demand from India, the world’s largest consumer of palm oil.
On Monday and Tuesday, the price rose, hitting the highest in more than a month, as a drop in early trade helped by exports and a weakening ringgit, and coupled with higher demand from refineries on improving margins.
On Wednesday, the price climbed for the fifth consecutive day, touching to the highest in six weeks, as the price was supported by short-covering and technical buying ahead of production data due later this week.
On Thursday, the price edged higher, for the sixth successive day, hovering near the six-week high, due to a weakening ringgit. However, data showed a rise in production and inventory weighed on sentiment.
On Friday, the price fell, after touching the highest in nearly two months on sustained buying by traders despite data showing higher production and inventory levels.
Technical analysis
According to the weekly FCPO chart, the price opened above the bottom Bollinger band, and the psychological barrier at RM2,000. By the end of the week, the price tested the middle Bollinger, closing below.
According to the daily FCPO chart, on Monday, the price opened above the middle Bollinger band and psychological barrier at RM2,000, while the SO enters overbought territory.
By the later session, the price tested the psychological barrier at 2,000, closing above and subsequently, below resistance level of RM2,050. Daily volume was lower than the average daily volume.
On Tuesday, the price opened above the middle Bollinger band and resistance level of RM2,050. An upside gap was formed from RM2,050 to RM2,060, which might be covered in near term or indicate potential to test the psychological barrier RM2,100 in near term.
By the later session, the previous gap was covered, while the price tested the psychological barrier RM2,100 and the top Bollinger band, closing below. Daily volume was lower than the average daily volume. On Wednesday, the price opened below the top Bollinger band and psychological barrier RM2,100, while the SO remained in overbought territory. By the later session, the price tested and resisted at level RM2,110, closing above. Daily volume was higher than the normal daily average volume. A bullish hammer candlestick was formed, indicating potential to test resistance at level RM2,150 in the near term.
On Thursday, the price opened below the top Bollinger band and psychological barrier of RM2,100, while a downside gap was formed from RM2,100 to RM2,115, which might be covered in near term or indicate reversal of uptrend. By the later session, the previous gap was covered, while the price tested the top Bollinger band and resistance level of RM2,150, closing above.
On Friday, the price opened on the resistance level of RM2,150 and below the top Bollinger band. By the later session, the price tested the top Bollinger band and resistance level of RM2,150, closing below. Daily volume was below the average daily volume.
In the coming week, the price has potential to range between RM2,100 and RM2,250. Resistance lines will be placed at 2,170 and 2,210, while support lines will be positioned at RM2,090 and RM2,050, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on the September 15 (Tuesday). Malaysian Public Holiday, Malaysia Day, on September 16 (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.