Crude Palm Oil Weekly Report – May 14, 2016

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TA02959Malaysian palm oil futures edged lower on Friday to 2,586, dropping the most in five months, tracking a drop in Chinese vegetable oils market.

Future Crude Palm Oil (FCPO) benchmark July 2016 contract settled at 2,586 on Friday, down 46 points or 1.8 per cent from 2,632 last Friday.

Trading volume decreased to 167,932 contracts from 179,764 contracts from last Tuesday to Thursday.

Open interest based decreased to 821,870 contracts from 826,594 contracts from last Tuesday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during May 1 to 10 increased 21.9 per cent to 391,222 tonnes compared with 320,990 tonnes during April 1 to 10.

Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during May 1 to 10 increased 32.3 per cent to 404,248 tonnes compared with 305,483 tonnes during April 1 to 10.

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

Spot ringgit weakened on Friday to 4.0310, as Malaysia posted its slowest economic growth in six and a half years in the first quarter hurt by low oil prices.

The Malaysian Palm Oil Board (MPOB) reported that Malaysian palm oil end-stocks in April fell 4.5 per cent to 1.3 million tonnes compared with 1.88 million tonnes from the previous month, hitting the lowest in 14 months because of smaller production gains due to dry weather from the El Nino weather pattern that lowered yields.

However, April exports were less than expected which limited the drawdown in stockpiles. Malaysian palm oil production in April rose 6.7 per cent at 1.8 million tonnes compared with 1.21 million tonnes during March.

Finally, Malaysian palm oil exports in April declined 12.8 per cent at 1.16 million tonnes, compared with 1.33 million tonnes in March.

On Monday, the price rose, touching a near two-week high, supported by improved demand and forecasts that stockpiles will drop on falling production ahead of a data release from the Malaysian Palm Oil Board (MPOB).

On Tuesday, the price climbed for the second consecutive day, as the ringgit weakened and stockpiles declined in the world’s second largest palm producer On Wednesday, the price rose for the third consecutive day, hitting the highest in nearly 3 weeks, on strong demand and a rally in soybeans.

On Thursday, the price retracted lower, heading for its sharpest drop in a week, tracking Dalian palm olein oil and a slightly stronger ringgit.

On Friday, the price fell for the second consecutive day, dropping the most in five months, tracking a drop in Chinese vegetable oils market.

 

Technical analysis

According to the weekly FCPO chart, the price opened above the middle Bollinger band and psychological barrier at 2,600. During the week, the price tested the psychological barrier at 2,700, closing below.

By the end of the week the price tested the middle Bollinger band and psychological barrier at 2,600, closing below.

On Monday, the price opened above the middle Bollinger band and psychological barrier at 2,600. An upside gap was formed from 2,630 to 2,660, which if able to be covered, could indicate potential to close below the middle Bollinger band.

By the later session, the previous gap was unable to be covered, and the price closed above the middle Bollinger band.

On Tuesday, the price opened above the middle Bollinger band and psychological barrier at 2,600. By mid-day, the price tested resistance level at 2,690, closing below. During the later session, the price tested the middle Bollinger band, closing above.

The price covered the previous day upside gap from 2,630 to 2,660, which could indicate potential to test the psychological barrier at 2,600.

However, as the price closed above middle Bollinger band, this could indicate indecision in the market.

On Wednesday, the price opened above the middle Bollinger band and psychological barrier at 2,700. An upside gap was formed from 2,670 to 2,705, which if able to be covered, could indicate potential to test the middle Bollinger band. By mid-day, the price tested the psychological barrier at 2,700, closing above. During the later session, the previous gap was unable to be covered, while the price tested the resistance level at 2,690, closing below.

On Thursday, the price opened above the middle Bollinger band and below resistance level at 2,690. A downside gap was formed from 2,665 to 2,680, which if able to be covered, could indicate potential to test the resistance level at 2,690. By the later session, the previous gap was unable to be covered, while the price tested the middle Bollinger band, closing below. The price attempted to cover the previous upside gap from 2,630 to 2,660, formed on May 9, which if covered, could indicate potential to test psychological barrier 2,600 in the near term.

On Friday, the price opened below the middle Bollinger band and psychological barrier at 2,600.

A downside gap was formed from 2,600 to 2,645, which if able to be covered, could indicate potential to test the middle Bollinger band.

During the later session, the previous gap was unable to be covered, while the price tested the support level at 2,590, closing below.

In the coming week, the price has potential to range between 2,650 and 2,800.

Resistance lines will be placed at 2,650 and 2,710, while support lines will be positioned at 2,540 and 2,490, these levels will be observed in the coming week.

 

Major fundamental news this coming week

ITS and SGS report released on May 16 (Monday) and on May 20 (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.