Malaysian palm oil futures extended their decline to the lowest level since last October this week following higher than expected production and end-stock data from the industry regulator, stronger ringgit and higher than expected Malaysia’s crude palm oil export tax announced on Thursday.
Benchmark crude palm oil futures (FCPO) for June delivery contract shed 3.88 per cent on Friday, closed at RM2,552, which is RM103 lower compared to RM2,655 last Friday.
Trading volume stood at 240,503 contracts during Monday to Thursday, rose 20.66 per cent from 199,315 contracts traded in the same period of previous week.
Open interest up 2.69 per cent to 893,481 contracts during Monday to Thursday, comparing to 870,043 contracts from last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during April 1 to 10 rose 20.90 per cent to 307,249 tonnes, comparing to 254,141 tonnes shipped during March 1 to 10.
Societe Generale de Surveillance (SGS) reported that the shipment of Malaysian palm oil product during April 1 to 10 had grew 24.76 percent to 312,489 tonnes from 250,481 tonnes during March 1 to 10.
Data from industry regulator Malaysia Palm Oil Board (MPOB) showed that Malaysian palm oil output surged 16.3 per cent to 1.46 million tonnnes in March, the first monthly gain since September and also the strongest month-on-month gain in over a year.
The data also showed that exports increased 14.3 per cent to 1.27 million tonnes from February, while the end stocks posted 6.5 per cent monthly gain to 1.55 million tonnes. Moreover, the crude palm export tax will be lowered to 7 percent in May from the level of 7.5 per cent in April according to circular released by MPOB on Thursday.
The shipment of palm oil related products to China has been slowed down after Chinese festival at beginning of the year. However, shipments to India and Middle East are expected to rise in April and May ahead of Ramadan which begins at end of May as palm usage for cooking purposes spikes during the festival.
Spot ringgit appreciated to 4.4065 against the US dollar this week, strengthened 1.8 per cent since beginning of the year after US President Donald Trump told the Wall Street Journal that the dollar “is getting too strong” and he would prefer the Federal Reserve to keep the interest low on Tuesday.
On Monday, Malaysian palm oil futures ended the trading day at their lowest in six months, weighed down by higher than expected production and end-stocks data from an industry regulator.
On Tuesday, Malaysian palm oil futures rebounded from a six-month low in late trade, snapped three earlier sessions of losses to gain on rising demand and tracked stronger-performing related oils.
On Wednesday, Malaysian palm oil futures fell to their lowest in six months, tracked weaker overnight soyoil on the Chicago Board of Trade and on concerned about higher output.
On Thursday, Malaysian palm oil futures ended lower, weighed down by a stronger ringgit and an announcement that Malaysia’s crude palm oil export tax would be higher than expected.
On Friday, Malaysian palm oil futures hit a new six-month low and declined for third consecutive session, weighed down by a stronger ringgit.
Technical Analysis
Based on the FCPO chart, the trading range for this week was almost 140 points, as the candlestick opened 20 points higher than last week’s closing and closed down 103 points at 2,552 as it had edged off a session low of 2,543, the lowest level since October.
On Monday, Malaysian crude palm oil futures continued its last week’s decline, with the benchmark contract slumped 68 points and closed at 2,592 which was the lowest point for nearly six months.
On Tuesday, Malaysian palm oil futures recovered some of the losses after touching a six-month low, with the active month gained 21 points and closed at 2,614.
On Wednesday, Malaysian palm oil futures continued its previous downtrend, as the active month slipped 21 points and closed at 2,591, the lowest since Oct 11 last year.
On Thursday, FCPO active month lost 25 points and closed at 2,564, the lowest level since Oct 11 as the market continued its downtrend during the late trade.
On Friday, Malaysian palm oil futures marked its third consecutive losses, closed down 14 points at 2,552 after it edged off session low 2,543, the lowest level since October.
Next week, market may try to test 2,500 and it is mostly trade in the range of 2,450 to 2,640.
Resistance lines will be positioned at 2,625 and 2,685, whereas support lines will be positioned at 2,455 and 2,402, these levels will be observed next week.
Major fundamental news this coming week
ITS and SGS reports will be released on April 15 to 17.
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.