Crude Palm Oil Weekly Report – 13 February 2016

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TA02407Malaysian palm oil futures climbed higher on Friday and reach its strongest level in nearly two years as tracking competing vegetable oils and a weaker ringgit. Future Crude Palm Oil (FCPO) benchmark April 2016 contract settled at 2,641 on Friday, up 66 points or 2.5 per cent from 2,575 last Friday.

Trading volume decreased to 83,445 contracts from 109,195 contracts from last Wednesday to Thursday.

Open interest based increased/decreased to 392,746 contracts from 402,369 contracts from last Wednesday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during February 1 to 10 decreased 22.7 per cent to 249,835 tonnes compared with 323,106 tonnes during January  1 to 10.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during February 1 to 10 decreased 38.8 per cent to 196,968 tonnes compared with 322,081 tonnes during January  1 to 10.

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

Spot ringgit weakened on Friday to 4.1670 due to slow demand for the local currency amid improving oil prices.

The Malaysian Palm Oil Board (MPOB) reported that Malaysian palm exports in January fell 13.8 per cent to 1.28 million tonnes from 1.48 million tonnes during the previous month, while Malaysian palm oil inventories declined 12.4 per cent to 2.31 million tonnes, their lowest level in five months, from 2.63 million tonnes in December.

Finally, Malaysian palm oil output fell 19.3 per cent to 1.12 million tonnes from 1.39 million tonnes during the previous month, as the El Nino weather affect continues.

A government circular showed on Friday that Malaysia, the world’s second-largest palm oil producer after Indonesia, will maintain its crude palm oil export tax at zero in March contrary to the market’s expectation.

On Wednesday, the price reversed gains after touching more than a 21 month high during the previous session, as bearish sentiment over weak exports overrode declining production.

On Thursday, the price rose more than one per cent, reversing earlier losses higher, due to worries that weather could hurt production.

On Friday, the price rose and reaches its strongest level in nearly two years due to a weaker ringgit and the price tracking competing vegetable oils.

 

Technical analysis

According to the weekly FCPO chart, the price opened below the top Bollinger band and psychological barrier at 2,500, while the SO remained in overbought territory.

By the end of the week, the price stays above the top Bollinger band and psychological barrier at 2,600.

According to the daily FCPO chart, on Wednesday, the price opened below the top Bollinger band and psychological barrier at 2,500. A downside gap was formed from 2,565 to 2,580, which if able to be covered, could indicate potential to test psychological barrier at 2,600. By the later session, the previous gap was able to be covered, while the price tested top Bollinger band and psychological barrier 2,600, closing below, while the SO remained in overbought territory.

On Thursday, the price opened below the top Bollinger band and psychological barrier at 2,600.

A downside gap was formed from 2,555 to 2,565, which if able to be covered, could indicate potential to test the psychological barrier at 2,600. By the later session, the previous gap was able to be covered, while the price tested the top Bollinger band and psychological barrier at 2,600, closing below.

On Friday, the price opened at above the psychological barrier at 2,600 and top Bollinger band.

By the later session, the price continued its previous upward movement and eventually closed at 2,641 and top Bollinger band. SO remained stay at oversold territory which may indicate that current upward movement may limited.

In the coming week, the price has the potential to range between 2,500 and 2,700.  Resistance lines will be placed at 2,725 and 2,683, while support lines will be positioned at 2,550 and 2,500, these levels will be observed in the coming week.

 

Major fundamental news this coming week

ITS and SGS report released on February 15 (Monday).

 

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.