Malaysian palm oil futures reversed last week losses and surged to a five-week high, buoyed by gains in soybean oil and other edible oil contracts on the Dalian Commodity Exchange, favorable export numbers and end of year production concerns.
The benchmark crude palm oil futures (FCPO) contract climbed 2.66 per cent to RM2,817 on Friday, which is RM73 higher than RM2,744 during the previous week.
The average daily trading volume during Monday to Thursday declined 3.7 per cent with a total of 204,428 contracts traded, as compared with 159,209 contracts traded during last Monday, Tuesday and Thursday.
Daily open interest during Monday to Thursday increased 1.02 per cent to 223,687 contracts from 221,431 contracts during last Monday, Tuesday and Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for October 1 to 25 were up 8.6 per cent to 1.178 million tonnes, from 1.085 million tonnes shipped during September 1 to 25.
SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during October 1 to 25 rose 8.3 per cent to 1.197 million tonnes from 1.106 million tonnes shipped during September 1 to 25.
Both cargo surveyors showed a stronger exports demand for palm oil-related products. Concerns that the La Nina weather pattern could hurt production also supported prices.
Data from the Southern Palm Oil Millers Association (SPPOMA) on Monday indicated that output for the October 1 to 20 period climbed 20.6 per cent, from the same period last year.
Malaysian output is forecast to rise to 20 million tonnes this year and to 20.5 million tonnes in 2018 due to better yields and expansion into matured areas, according to forecasts given in the government’s annual economic report released ahead of Prime Minister Datuk Seri Najib Tun Razak’s announcement of the 2018 budget.
Spot ringgit depreciated 0.37 per cent to 4.2415 against the US dollar this week, compared to 4.2260 on last Friday.
The dollar traded near a three-month high, underpinned by reports that Republican senators were favoring John Taylor to become the next head of the US Federal Reserve.
On Monday, Malaysian palm oil futures climbed 1.7 per cent, tracking gains in soybean oil and other edible oil contracts on the Dalian Commodity Exchange.
On Tuesday, Malaysian palm oil futures reversed gains after hitting a five-week high, with sentiment dented by weakness in the Chicago Board of Trade (CBOT) soyoil and expectations of slower export growth.
On Wednesday, Malaysian palm oil futures jumped one per cent, supported by gains in overseas rival oils prices and a rise in October exports. On Thursday, Malaysian palm oil futures extended gains, supported by strength in soy oil markets, favorable export numbers and end of year production concerns.
On Friday, Malaysian palm oil futures rose and were headed for a third consecutive session of gains, on the back of strength in soyoil markets, solid export data from cargo surveyors and a weaker ringgit.
Technical analysis
According to the FCPO daily chart, the market successfully broke out from consolidation phase and traded in bullish trend, hitting a five-week high at 2,833 on Friday.
On Monday, Malaysian palm oil traded higher for a second straight day and surged to a five-week high, with the benchmark contract closing at 2,787, 43 points above last week’s closing price.
On Tuesday, Malaysian palm oil erased earlier gains and traded lower, with the benchmark contract closing at 2,777, 10 points below Friday’s closing price.
On Wednesday, Malaysian palm oil erased earlier losses and traded higher, with the benchmark contract closing at 2,806, 29 points above Friday’s closing price.
On Thursday, Malaysian palm oil traded higher for a second consecutive day, with the benchmark contract closing at 2814, eight points above Friday’s closing price.
On Friday, Malaysian palm oil pared its earlier gains and ended the day slightly higher, with the benchmark contract closing at 2817, three points above Friday’s closing price.
In the coming week, the market is expected to trend upwards as the daily candlesticks trade on the Upper Bollinger Band.
Bullish trend could be seen from the widening of the Bollinger Bands and the formation of higher highs and higher lows on the weekly candlesticks chart.
Resistance lines will be positioned at 2,850 and 2,880, whereas support lines will be positioned at 2,766 and 2,735. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on October 30.
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.