Crude Palm Oil Weekly Report – November 4, 2017

Malaysian palm oil futures erased last week’s gains and edged down, after hitting a seven-week high, on weaker local demand and expected higher output, while traders stayed on the sidelines ahead of forecasts at an industry conference later in the day.

The benchmark crude palm oil futures (FCPO) contract inched down 0.46 per cent to RM2,804 on Friday, which is RM13 higher than RM2,817 during the previous week.

The average daily trading volume during Monday to Thursday slightly fell 23.43 per cent with a total of 156,534 contracts traded, as compared with 204,428 contracts traded during last Monday to Thursday.

Daily open interest during Monday to Thursday increased 4.95 per cent to 234,763 contracts from 223,687 contracts during last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for October 1 to 31 were up 2.5 per cent to 1.407 million tonnes, from 1.373 million tonnes shipped during September 1 to 30.

SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during October 1 to 31 rose 2.3 per cent to 1.417 million tonnes from 1.385 million tonnes shipped during September 1 to 30.

Both cargo surveyors’ data showed a slight increase in palm oil demand. Gains in exports have been slowing since mid-September as demand ebbs after the major festivities such as Diwali in India and the Mid-Autumn festival in China. Palm oil usage usually slows during winter in markets such as China and Europe as the tropical oil solidifies in cold temperatures. Palm oil production in September fell 1.7 per cent due to fewer working days. Output is expected to rise in October but gains could be lower than forecast. Production in the first 20 days of October rose 10.5 per cent from a month earlier, data from the Malaysian Palm Oil Association (MPOA) showed.

Spot ringgit appreciated 0.14 per cent to 4.2355 against the US dollar, compared with 4.2415 on last Friday. President Donald Trump on Thursday tapped Powell to lead the US central bank, breaking with precedent by denying incumbent Janet Yellen a second term but signalling a continuation of her cautious monetary policies.

Trump’s decision was in line with what market participants had been expecting, and the dollar reacted only slightly after the news.

On Monday, Malaysian palm oil futures rose to their strongest in a month and a half, tracking gains in rival edible oilseed soy on the Chicago Board of Trade (CBOT). On Tuesday, Malaysian palm oil futures fell after four straight sessions of gains on weakness in related edible oils, while shipment data from cargo surveyors did little to support the market.

On Wednesday, Malaysian palm oil futures rose on crude oil gains, but traders said the higher prices were not sustainable due to expectations of strong production numbers for October.

On Thursday, Malaysian palm oil futures dropped, tracking weak soyoil prices and as traders awaited price forecasts from an industry conference.

On Friday, Malaysian palm oil futures edged down, as local demand softened on expectations of higher output and as traders stayed on the sidelines ahead of forecasts at an industry conference later in the day.

 

Technical analysis

According to the FCPO daily chart, the market hit a seven-week high at 2,855 on Monday before pulling back and going into a sideway trade.

On Monday, Malaysian palm oil pared earlier gains after hitting a one-and-a-half month high, with the benchmark contract closing at 2,840.

On Tuesday, Malaysian palm oil gapped-down and traded lower, with the benchmark contract closing at 2,816.

On Wednesday, Malaysian palm oil gapped-up and rose, with the benchmark contract closing at 2,837.

On Thursday,     Malaysian palm oil declined steadily in the late trade, with the benchmark contract closing at 2,820.

On Friday, Malaysian palm oil gapped-down and fell for a second day, with the benchmark contract closing at 2,804.

The market continued on uptrend on formation of higher highs and higher lows on the weekly candlesticks chart. Another bullish signal can be seen from the upward movement of Bollinger Bands.

In the coming week, traders might initiate a long position at 2,790 and exit the position if the market traded below 2,750.

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 November 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.

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