Malaysian palm oil futures pared losses to trade in positive after hitting more than 10-month low during earlier in the week, tracking weakening ringgit and a stronger performance in rival edible oils on Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange.
The benchmark crude palm oil futures (FCPO) contract gained 1.18 per cent, to close at RM2,482 on Friday, which is RM29 higher than RM2,453 during the previous week.
Due to a rollover, the average daily trading volume before Friday surged 40.21 per cent to a total of 177,135 contracts, comparing to 168,445 contracts traded during last Monday to Thursday.
Daily open interest during Tuesday to Thursday increased 3.34 per cent to 661,519 contracts from 853,541 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that export of Malaysian palm oil products during June 1 to 15 dropped 17.6 per cent to 508,960 tonnes from 617,697 tonnes shipped during May 1 to 15.
Societe Generale de Surveillance (SGS) reported that export of Malaysian palm oil products during June 1 to 15 down 14.66 per cent to 523,505 tonnes from 613,465 tonnes shipped during May 1 to 15.
Monthly data from industry regulator Malaysia Palm Oil Board (MPOB) showed that palm oil inventories in May dipped 2.6 per cent from the previous month to 1.56 million tonnes, its lowest since March and the lowest for the month of May since 2009 as higher exports to feed Ramadan demand outpaced production growth, which is still seeing some lingering effects from a crop damaging El Nino in 2016.
The Malaysian palm oil exports in May rose 17.3 per cent from April to 1.51 million tonnes, the most in nine months according to official MPOB data.
While May production rose 6.9 per cent from April to 1.65 million tonnes, the highest in seven months. This matched the month-on-month gain in 2015, before hot dry weather from the El Nino limited output the following year. Moreover, Malaysia will raise its crude palm oil export tax to to 6.5 per cent in July from six per cent in June, according to a circular from the MPOB on Friday.
This week, spot ringgit depreciated slightly to 4.2785 against the US dollar, weakened 0.27 per cent comparing to 4.2670 on last Friday as US Federal Reserve raised interest rates by a quarter per centage point on Thursday, the second time in three months and cited continued economic growth and job market strength following a two-day meeting.
On Monday, Bursa Malaysia Derivative was closed for Malaysian public holiday.
On Tuesday, Malaysian palm oil futures hit a 10-month low in the second half of trade, on the back of a stronger ringgit, while expectations of rising output and weaker export growth also weighed on the market.
On Wednesday, Malaysian palm oil futures bounced back from a 10-month low seen during the previous session, tracking a stronger performance in soyoil on the Chicago Board of Trade and China’s Dalian Commodity Exchange.
On Thursday, Malaysian palm oil futures rose for the second consecutive session on the back of concerns over output growth. However, the market had earlier shown mixed signals due to a stronger ringgit and weaker exports.
On Friday, Malaysian palm oil futures rose more than one per cent, in line for the third straight day of gains, supported by a weaker ringgit and rising related edible oils.
Technical analysis
Based on the FCPO daily chart, the market rebounded after hitting its 10-month low on Tuesday.
The fall was held at 2,425 earlier during the week, failing to break through the support level at 2,400, leading it to pare losses and end on a higher note compared with last week.
On Tuesday, Malaysian palm oil futures continued its downtrend as the active month contract lost 28 points to close at 2,425, the lowest level since last August.
On Wednesday, Malaysian palm oil futures rebounded after failing to break through its 10-month low, the benchmark contract closed at 2,458, 33 points higher than its previous closing price.
On Thursday, Malaysian palm oil futures extended its gains after rebounding from its 10-month low, the benchmark contract rose 40 points to close at 2,498.
On Friday, Malaysian palm oil futures posted three consecutive daily gains, the benchmark contract for September delivery closed at 2,482, which was 31 points higher than its previous closing price.
In the coming week, the market would likely move towards to the middle band as the fall was held at 2,425 earlier in the week.
Failing to break through the resistance level might cause it to fall back to the week-low and test psychological price level of 2,400.
Resistance lines will be positioned at 2,528 and 2,560, whereas support lines will be positioned at 2,400 and 2,377. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on June 20.
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.