Crude Palm Oil Weekly Report – April 2, 2016

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TA02711Malaysian palm oil futures climbed higher on Friday to 2,748, due to tracking competing vegetable oils higher.  Future Crude Palm Oil (FCPO) benchmark June 2016 contract settled at 2,748 on Friday, up 26 points or 0.1 per cent from 2,722 last Friday. Trading volume decreased to 172,285 contracts from 180,151 contracts from last Monday to Thursday.

Open interest based decreased to 990,582 contracts from 991,901 contracts from last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during March increased 24.6 per cent to 1.175 million tonnes compared with 943,135 tonnes during February.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during March 1 to 25 increased 13.1 per cent to 883,225 tonnes compared with 781,030 tonnes during February 1 to 25.

Another cargo surveyor, Societe Generale de Surveillance (SGS), reported that Malaysia’s palm oil exports during March increased 22.2 per cent to 1,167,775 tonnes compared with 955,604 tonnes during February.

Overall, demand strengthened from China, Pakistan, India, and the United States, while demand weakened from the European Union.  Spot ringgit strengthened on Friday to 3.889, as investors booked profits from weekly gains ahead of key U.S jobs data.

Indonesia will keep the export tax for crude palm oil at zero in April, unchanged from March, Nurlaila Nur Muhammad, the director of export of agriculture and forestry products at the Trade Ministry, said on Monday.

Malaysia’s palm oil exports to primarily Muslim countries have been declining as rising prices for the tropical oil and weak domestic currencies are limiting imports, and the high-consumption period of Ramadan is unlikely to turn the trend.

The holy month of Ramadan starts in June this year and is known for its communal fasting. But palm oil consumption typically surges leading up to and during this time as Muslims use the oil to prepare meals to break the fast and during large banquets to celebrate the Eid al-Fitr holiday that marks the end of the fasting period.

On Monday, the price rose for a 2nd consecutive day, touching the highest in two years, on persistent worries that a crop-damaging El Nino weather event would curb yields.

On Tuesday, the price reversed earlier losses, climbing for a third consecutive day in later session, due to technical buying and coupled with tracking competing vegetable oils higher.  On Wednesday and Thursday, the price declined, ending three successive days of gains, as a stronger ringgit dragged the market down, outweighing an improvement in export demand.

On Friday, the price rose, ending two successive days of declines, tracking competing vegetable oils higher.

 

Technical analysis

According to the weekly FCPO chart, the price opened below the top Bollinger band and above psychological barrier at 2,700, while the SO remained in overbought territory. By the end of the week, the price tested the top Bollinger band, closing below, while the SO remained in overbought territory.

According to the daily FCPO chart, on Monday, the price opened below the top Bollinger band and resistance level at 2,750. An upside gap was formed from 2,720 to 2,735, which if able to be covered, could indicate potential to test psychological barrier 2,700. By the later session, the previous gap was unable to be covered, while the price tested the resistance level at 2,750, closing above, while the SO remained in overbought territory.

On Tuesday, the price opened below the top Bollinger band and above resistance level at 2,750. By the later session, the price tested the resistance level at 2,750, closing above, while the SO remained in overbought territory. There was attempt to cover the previous day upside gap from 2,720 to 2,730. However it was unable to do so, which could indicate potential to test the top Bollinger band and psychological barrier at 2,800 in the near term.

On Wednesday, the price opened below the top Bollinger band and above resistance level at 2,750. By the later session, the price tested the resistance level at 2,750, closing below, while the SO remained in overbought territory. A bearish hanging man candlestick was formed, which could indicate that price will be unable to test the psychological barrier at 2,800.

On Thursday, the price opened below the top Bollinger band and resistance level at 2,750. A downside gap was formed from 2,725 to 2,750, which if able to be covered, could indicate potential to close above the resistance level at 2,750. By the later session, the previous gap was covered, while the price tested the resistance level at 2,750 closing below. The SO remained in overbought territory. The price was able to cover the previous upside gap from 2,720 to 2,730, which might indicate price might test psychological barrier 2,800 in the near term.

On Friday, the price opened below the top Bollinger band and resistance level at 2,750, while the SO exited overbought territory. An upside gap was formed from 2,720 to 2,760, which if able to be covered, could indicate potential to test the psychological barrier at 2,700. By the later session, the previous gap was unable to be covered, while the price tested the resistance level at 2,750, closing below.

This coming week, the price has potential to range between 2,650 and 2,800.  Resistance lines will be placed at 2,790 and 2,850, while support lines will be positioned at 2,710 and 2,650, these levels will be observed in the coming week.

No major fundamental news this coming week.

 

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.