Malaysian palm oil futures plunged to a five-month low, on expectation of rising palm oil stockpiles and weakening demand outlook, and weighed down by stronger ringgit.
The benchmark crude palm oil futures (FCPO) contract plunged 4.88 per cent to RM2,477 on Friday, which is RM127 lower than RM2,604 during the previous week.
The average daily trading volume during Monday to Thursday increased 14.92 per cent with a total of 171,789 contracts traded, as compared with 112,117 contracts traded during last Monday to Wednesday.
However, daily open interest during Monday to Thursday edged up 0.04 per cent to 239,839 contracts from 239,740 contracts during last Monday to Wednesday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for November 1 to 30 declined 5.3 per cent to 1.332 million tonnes, from 1.407 million tonnes shipped during October 1 to 31.
SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during November 1 to 30 fell 7.5 per cent to 1.311 million tonnes from 1.417 million tonnes shipped during October 1 to 31.
Stockpiles are expected to swell 11.4 per cent to 2.44 million tonnes from end-October, which would be the highest level since December 2015 and marked a fifth consecutive month of gains, according to Reuters poll.
Production of the edible oil dipped around three per cent in November from the previous month to 1.95 million tonnes.
Exports are also expected soften in November, falling faster than production, which is expected to be down six per cent at 1.45 million tonnes, the first monthly decline in five months.
Spot ringgit appreciated 0.05 per cent to 4.0855 against the US dollar, compared to 4.0875 on last Friday.
The dollar index, which gauges the UD currency against a basket of six major rivals, was up 0.2 per cent on the day at 93.961, up more than one per cent for the week, its biggest rise since late October.
Technical analysis
According to the FCPO daily chart, the market plunged to a five-month low after breaching the psychological support level at 2,500 on Thursday.
On Monday, Malaysian palm oil erased its earlier gains and settled lower, with the benchmark contract closing at 2,583.
On Tuesday, Malaysian palm oil dipped to a five-month low, with the benchmark contract closing at 2,564.
On Wednesday, Malaysian palm oil slipped to a five-month low, with the benchmark contract closing at 2,537.
On Thursday, Malaysian palm oil gapped-down and dropped for fourth consecutive day, with the benchmark contract closing at 2,500.
On Friday, Malaysian palm oil closed lower for fifth consecutive day to a nearly six-month low, with the benchmark contract closing at 2,477.
In the coming week, the market is seen to test the next psychological price level at 2,400 as the candlesticks are trading on the Lower Bollinger Band.
However, the downward momentum was depleting which can be observed for a decrease in volume from Tuesday to Friday.
Resistance lines will be positioned at 2,590 and 2,625, whereas support lines will be positioned at 2,450 and 2,425. These levels will be observed next week.
Major fundamental news this coming week
MPOB, ITS and SGS reports will be released on December 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.