Crude Palm Oil Weekly Report – October 14, 2017

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Malaysian palm oil futures extended gains for second consecutive weeks, tracking stronger soyoil performances on Chicago Board of Trade (CBOT) and buoyed by technical buying.

The benchmark crude palm oil futures (FCPO) contract up 0.62 per cent to RM2,749 on Friday, which is RM17 higher than RM2,732 during the previous week.

The average daily trading volume during Monday to Thursday rose 23 per cent with a total of 205,153 contracts traded, as compared with 166,796 contracts traded during last Monday to Thursday.

Daily open interest during Monday to Thursday increased 0.81 per cent to 226,799 contracts from 224,967 contracts during last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for October 1 to 10 up 18.09 per cent to 448,349 tonnes, from 379,652 tonnes shipped during September 1 to 10.

SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during October 1 to 10 rose 16.49 per cent to 462,082 tonnes from 396,672 tonnes shipped during September 1 to 10.

Monthly data from industry regulator, Malaysia Palm Oil Board (MPOB) showed production slipped 1.7 per cent to 1.78 million tonnes, marking a second month of declines, curbed by a higher number of public holidays in September compared with August.

The exports came in weaker than expected, rising just 1.8 per cent to 1.52 million tonnes on a monthly basis. Palm oil inventories on September surged for four per cent to hit its highest since February 2016 at 2.02 million tonnes.

Spot ringgit appreciated 0.38 per cent to 4.2205 against the US dollar, compared with 4.2365 last Friday.

The dollar index, which tracks the US currency against a basket of six major peers, was 0.1 per cent lower at 92.970, and poised to shed 0.9 per cent for the week.

On Monday, Malaysian palm oil futures traded higher to register its fifth session of gains, tracking strength in related edible oils and ahead of an official September data release this week.

On Tuesday, Malaysian palm oil futures declined sharply in the late trade after five straight sessions of gains, tracking weakness in related edible oils on China’s Dalian Commodity Exchange and also on data from the MPOB.

On Wednesday, Malaysian palm oil futures ended slightly higher, supported by a stronger export outlook and technical buying, though gains were capped by expectations of rising production in October.

On Thursday, Malaysian palm oil futures extended gains for a second session, buoyed by stronger soyoil and technical buying.

On Friday, Malaysian palm oil futures rose to their strongest levels in two weeks, charting a third consecutive session of gains, tracking a rise in soyoil on the Chicago Board of Trade.

 

Technical analysis

According to the FCPO daily chart, the market began the trading week at 2,744 but was resisted at 2,746, which is a two-week high.

The market slipped and broke through the psychological price level 2,700 to hit the week-low at 2,677 before rebounded slightly to finish the week at 2,749.

On Monday, Malaysian palm oil futures traded higher, with the benchmark contract closing at 2,735, three points higher than Friday’s closing price.

On Tuesday, Malaysian palm oil futures slipped sharply, with the benchmark contract closing at 2,695, 40 points lower than Friday’s closing price.

On Wednesday, Malaysian palm oil futures remained flat, with the benchmark contract closing at 2,695, unchanged from Friday’s closing price.

On Thursday, Malaysian palm oil pared its gains and ended the day slightly higher, with the benchmark contract closing at 2,710, 15 points above Friday’s closing price.

On Friday, Malaysian palm oil erased its earlier losses and surged to two-week high, with the benchmark contract closing at 2,749, 39 points above from Friday’s closing price.

Based on the daily candlesticks chart, the Bollinger Bands are narrowing due to the decrease in price volatility. Palm oil price was underpinned by the formation of double bottoms, which is the sign of bullish reversal.

However, the uptrend will be confirmed by the successful breakthrough from 2,750.

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 next week.

 

Major fundamental news this coming week

MPOB, ITS, and SGS reports will be released on October 16.

 

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.