Malaysian palm oil futures reversed two consecutive weeks of decline and traded higher on Friday ahead of the release of official MPOB data for September, tracking stronger performance from soyoil on the Chicago Board of Trade (CBOT).
The benchmark crude palm oil futures (FCPO) contracted upwards 1.3 per cent to RM2,732 on Friday, which is RM35 higher than RM2,697 recorded during the previous week.
The average daily trading volume during Monday to Thursday declined 27.35 per cent with a total of 166,796 contracts traded, as compared with 229,593 contracts traded during last Monday to Thursday.
Daily open interest during Monday to Thursday rose 6.16 per cent to 224,967 contracts from 211,991 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for September 1 to 30 rose 10.4 per cent to 1.373 million tonnes, from 1.243 million tonnes shipped during August 1 to 31.
SocieteGenerale de Surveillance (SGS) reported that export of Malaysian palm oil products during September 1 to 30 rose 10 per cent to 1.385 million tonnes from 1.259 million tonnes shipped during August 1 to 31.
Palm oil shipments from Malaysia increased around 10 per cent for the full month of September, compared with the previous month, according to data from cargo surveyors. India and China, the world’s top two buyers of palm oil, will celebrate Diwali and the Mid-Autumn events which will typically drive up usage of the tropical oil. While demand in September was at its strongest monthly levels in slightly over a year, poll respondents expect shipments to taper off at the end of the year.
Data from the industry regulator, Malaysia Palm Oil Board (MPOB) will be released during the coming week. Stockpiles on September have risen 3.2 per cent to two million tonnes from August, up for a third straight month, according to the median response surveyed by Reuters. September production is expected to rise 1.5 per cent to 1.84 million tonnes, from 1.81 million tonnes in August, which would be the strongest level since October 2015. Exports are estimated to increase 7.8 per cent in September to 1.6 million tonnes from August, as key buyers China and India stocked up ahead of major holiday periods.
Spot ringgit depreciated 0.34 per cent to 4.2365 against the US dollar, compared to 4.2220 on last Friday. As expectations of a US rate increase continues to solidify to more than 71 per cent by December from 42 per cent a month earlier, according to the CME’s Fedwatch indicator, the dollar has rallied more than three per cent over the last month.
On Monday, Malaysian palm oil futures fell for a fourth consecutive session, weighed down by weaker soyoil on the CBOT and expectations of rising stockpiles. On Tuesday, Malaysian palm oil futures saw its first daily gain in a week evening, supported by a weaker ringgit.
On Wednesday, Malaysian palm oil futures hit one-week highs, supported by technical buying and expectations of a slight rise in end-September inventory levels.
On Thursday, Malaysian palm oil futures climbed to a one-week high in early trade before paring gains later on concerns of rising output and weakening exports.
On Friday, Malaysian palm oil futures traded slightly higher in quiet trade ahead of the release of official data for September, but were set to finish the week stronger after two consecutive weeks of declines.
Technical analysis
Based on the FCPO daily chart, the market slid to a seven-week low at 2,653 during the beginning of the week before rebounding and trading higher. However, the advance was resisted near to 2,750.
On Monday, Malaysian palm oil futures traded lower for four consecutive sessions and dipped to a six-week low. The benchmark contract closed at 2,665, which is 32 points lower than the previous closing price.
On Tuesday, Malaysian palm oil futures snapped its streak of four losses and traded higher. The benchmark contract closed at 2,683, 18 points higher than the previous closing price.
On Wednesday, Malaysian palm oil futures advanced for the second consecutive session, hitting the week high. The benchmark contract closed at 2,717, 34 points higher than the previous closing price.
On Thursday, Malaysian palm oil futures erased its earlier gains during the second session and ended the day unchanged. The benchmark contract closed at 2,717 during Friday’s close.
On Friday, Malaysian palm oil futures erased its earlier losses and traded higher. The benchmark contract closed at 2,732, which is 15 points higher than Friday’s closing price.
The market is expected to trade lower as a head and shoulders pattern is formed last week. According to daily candlesticks chart, upward momentum is weakening as shown in lower week-highs.
Resistance lines will be positioned at 2,770 and 2,800, whereas support lines will be positioned at 2,650 and 2,610. These levels will be observed in the coming week.
Major fundamental news this coming week
MPOB, ITS, and SGS reports will be released on October 10.
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.