Crude Palm Oil Weekly Report – October 24, 2015

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TA01584Malaysian palm oil futures edged lower on Friday to 2,326, due to a stronger ringgit and dwindling demand.

Future Crude Palm Oil (FCPO) benchmark January 2016 contract settled at 2,326 on Friday, up 21 points or 0.9 per cent from 2,305 last Friday.

Trading volume increased to 140,397 contracts from 137,739 contracts from last Monday to Thursday, excluding Wednesday.

Open interest based decreased to 566,684 contracts from 574,470 contracts from last Monday to Thursday, excluding Wednesday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during October 1 to 20 decreased 12.9 per cent to 929,837 tonnes compared with 1.068 million tonnes during September 1 to 20.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during October 1 to 20 decreased 11.8 per cent to 941,134 tonnes compared with 1.122 million tonnes during September 1 to 20.

Overall, demand strengthened from the EU, Pakistan and India, while demand weakened from the US and China.

Spot ringgit strengthened on Friday to 4.222, as their governments’ bond prices rose, and coupled with low oil prices and growing caution ahead of the government’s 2016 budget plan due later on Friday.

Indonesia’s crude palm oil (CPO) output held around its highest levels in a year in September.

It saw little change compared wiht the previous month, while exports rose to their highest since June, a Reuters survey showed.

Gains in Indonesia’s palm oil output next year will be 500,000 tonnes lower than initially expected, the chairman of an industry body in the world’s top producer said, as the El Nino dry weather pattern offsets higher yields from maturing trees.

Crude palm oil will rise to 33 million tonnes in 2016, Derom Bangun, chairman of the Indonesian Palm Oil Board told reporters on Tuesday.

This was lower than the 33.5 million tonnes initially estimated and the 31.5 million tonnes forecast for this year.

On Monday, the price fell, due to selling of soybean oil on China’s Dalian exchange, despite the ringgit weakening.

On Tuesday, Wednesday and Thursday, the price rose, to the highest in more than two weeks, while staying range-bound, as the ringgit weakened, coupled with Indonesia, the world’s top producer, cutting its output estimates for next year, as the El Nino dry weather pattern offsets higher yields from maturing trees, and expectations seasonally lower supply.

On Friday, the price declined two2 per cent, ending three consecutive days of gains, and remained range-bound, due to a stronger ringgit and sluggish demand.

 

Technical analysis

According to the weekly FCPO chart, the price opened above the middle Bollinger band and psychological barrier at 2,300. By the end of the week, the price tested the psychological barrier at 2,300, closing above. A doji candlestick was formed, indicating market players are uncertain regarding the market direction heading into this coming week.

According to the daily FCPO chart, on Monday, the price opened above the psychological barrier at 2,300 and the middle Bollinger band.

An upside was formed from 2,305 to 2,320, which may be covered or indicate potential uptrend towards the psychological barrier 2,350 in the near term.

By the later session, the previous gap was covered, while the price tested the middle Bollinger band and psychological barrier at 2,300, closing below.

Daily volume was above the normal daily average volume.

On Tuesday, the price opened below the middle Bollinger band and psychological barrier at 2,300. By the later session, the price tested the middle Bollinger band and psychological barrier at 2,300, closing above.

On Wednesday, the price opened above the middle Bollinger band and resistance level at 2,350.

An upside gap was formed from 2,320 to 2,350, which may be covered or indicate potential to test the psychological barrier at 2,400 in the near term.

By the later session, the previous gap was unable to be covered, while the price tested the middle Bollinger band and resistance level 2,350, closing above. Daily volume was above the average daily volume amount.

On Thursday, the price opened and closed above the middle Bollinger band and resistance level at 2,350.

On Friday, the price opened below the middle Bollinger band and resistance level at 2,350.

A downside gap was formed from 2,330 to 2,370, which might be covered or indicate potential to test the psychological barrier at 2,300 in the near term.

By the later session, the previous gap was unable to be covered, while the price tested the middle Bollinger band, closing below.

In the coming week, the price has potential to range between 2,250 and 2,400.

Resistance lines will be placed at 2,390 and 2,450, while support lines will be positioned at 2,290 and 2,250, these levels will be observed this coming week.

 

Major fundamental news this coming week

ITS and SGS report released on October 26 (Monday) and October 30 (Friday).

 

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.