Malaysian palm oil futures climbed higher on Friday to 2,411, due to improving export data and expected lower output and as traders covered short positions, but were still set for a small weekly fall.
Future Crude Palm Oil (FCPO) benchmark March 2016 contract settled at 2,411 on Friday, down 15 points or 0.9 per cent from 2,433 last Friday.
Trading volume increased to 189,562 contracts from 151,559 contracts from last Monday to Thursday.
Open interest based increased 841,546 to contracts from 775,388 contracts from last Monday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 10 increased 15.2 per cent to 323,106 tonnes compared with 280,445 tonnes during December 1 to 10.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1 to 15 increased 4.3 per cent to 486,846 tonnes compared with 466,876 tonnes during December 1 to 15.
Another cargo surveyor, Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during January 1 to 10 increased 7.9 per cent to 322,081 tonnes compared with 298,587 tonnes during December 1 to 10.
SGS’ report showed that Malaysia’s palm oil exports during January 1 to 15 increased 5.6 per cent to 489,468 tonnes compared with 463,618 tonnes during December 1 to 15.
Overall, demand strengthened from China, India, and Pakistan, while demand weakened from the European Union and the US.
Spot ringgit weakened on Friday to 4.3965, as crude oil prices continue to hover near a 12 year low.
The Malaysian Palm Oil Board’s (MPOB) report showed that Malaysian palm oil inventories in December declined by 9.5 per cent to 2.63 million tonnes from 2.908 million tonnes at the end of November.
Malaysian palm oil stocks fell for the first time in December since June 2015 as production in the world’s second-largest grower declined due to the El Nino weather pattern, industry regulator data released on Monday showed.
Malaysian palm oil exports fell 1.1 per cent to 1.48 million tonnes in December, and finally Malaysian palm oil output in December declined 15.4 per cent from November.
Malaysia, the world’s second largest palm producer after Indonesia, will maintain its crude palm oil export tax at zero for the 10th consecutive month in February.
On Monday and Tuesday, the price fell, touching the lowest in more than three weeks, despite supportive government data, weighed down by plunging crude oil prices to 12-year lows and volatile global equities.
On Wednesday, the price rose by more than one per cent, ending two successive days of declines as traders were keen to lock in hedges for physical crude palm oil (CPO) at these levels.
On Thursday, the price fell, reversing the morning session of gains, as demand for the vegetable oil wanes on slowing exports.
On Friday, the price rose, underpinned by improving export data and expected lower output and as traders covered short positions, but were still set for a small weekly fall.
Technical analysis
According to the weekly FCPO chart, the price opened above the middle Bollinger and psychological barrier at 2,400, while the SO exited overbought territory. By the end of the week, the price tested the psychological barrier at 2,400, closing above.
According to the daily FCPO chart, on Monday, the price opened below the middle Bollinger band and resistance level at 2,450.
The price tested resistance level at 2,450, closing below. The price tested the middle Bollinger band, closing below, and tested support level at 2,385, closing above. By the later session, the price closed on psychological barrier at 2,400.
On Tuesday, the price opened below the middle Bollinger band and support level at 2,385. A downside gap was formed from 2,375 to 2,400, which if able to be covered, could indicate a possibility of closing above the psychological barrier at 2,400. By the later session, the previous gap was unable to be covered, while the price tested the support level at 2,385, closing below.
On Wednesday, the price opened below the middle Bollinger band and support level 2,385. By the later session, price tested the psychological barrier at 2,400, closing above.
On Thursday, the price opened below the middle Bollinger band and above psychological barrier at 2,400. By the later session, the price tested the middle Bollinger band, closing below, and tested psychological barrier at 2,400, closing above.
On Friday, the price opened below the middle Bollinger band and above psychological barrier at 2,400. By the later session, the price tested the middle Bollinger band, closing below.
This coming week, the price has potential to range between 2,370 and 2,450.
Resistance lines will be placed at 2,450 and 2,510, while support lines will be positioned at 2,370 and 2,330, these levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS report released on the January 20 (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.