Crude Palm Oil Weekly Report – March 10, 2018

Malaysian palm oil futures have been under pressured since India raised import taxes on palm oil last week and dropped more than five per cent. This week, it further went down due to cancelled shipments from India importers and expected increase in production in March.

The benchmark crude palm oil futures (FCPO) contract fell 3.77 per cent to RM2,376 on Friday, which was RM93 lower than RM2,469 recorded during the previous week.

The average daily trading volume during Monday to Thursday increased 14.43 per cent with a total average of 33,252 contracts traded, as compared with a total average of 38,861 contracts traded during last Monday to Thursday.

Daily average open interest during Monday to Thursday fell 1.68 per cent to 229,567 contracts from 225,706 contracts during last Monday to Thursday.

Intertek Testing Services (ITS) reported that export of Malaysian palm oil products for February 1 to 25 rose five per cent to 1.065 million tonnes, from 1.014 million tonnes shipped during January 1 to 25. (No ITS data was available for the full month of February)
Societe Generale de Surveillance (SGS) reported that export of Malaysian palm oil products during February fell 11 per cent to 1.168 million tonnes from 1.313 million tonnes shipped during January.

India raised import taxes to the highest level in more than a decade on the tropical oil last week, causing up to 100,000 tonnes cancelled shipments to India. Despite bullish forecasts at the Palm Oil Conference (POC) 2018 from leading industry analyst Dorab Mistry on Tuesday, saying that Malaysia palm oil could climb to RM2,700 per tonne by June, supported by strong world economic growth and higher demand, this does not stop the palm prices from slipping more than one per cent to the lowest level in a year and a half.

Overall, exports from Malaysia are forecast to drop 11.9 per cent to 1.33 million tonnes in February, according to a Reuters survey of eight traders, planters and analysts.

Spot ringgit depreciated 0.04 per cent to 3.9145 against the US dollar, compared with 3.9160 last Thursday.

The dollar gained against most Asian currencies on Friday as a potential breakthrough in nuclear tensions between the US and North Korea supported sentiments regarding the performance of the greenback, while also supporting the South Korean won.

Technical analysis
According to the FCPO daily chart, the market continued its downward trends for more than five per cent.

On Monday, FCPO ended at 2,462, seven points lower than the previous close of 2,469, with traded volume of 11,917.

On Tuesday, FCPO ended at 2,485, 23 points higher than the previous close of 2,462, with a traded volume of 17,812.

On Wednesday, FCPO ended at 2,440, 45 points lower than the previous close of 2,485, with a traded volume of 15,541.

On Thursday, FCPO ended at 2,409, 31 points lower than the previous close of 2,440, with a traded volume of 20,743.

On Friday, FCPO ended at 2,376, 33 points lower than the previous close of 2,409, with a traded volume of 32,804.

Based on the daily candlesticks chart, FCPO will likely continue the downwards trend, as indicated by the Lower Bollinger Band which is pointing to a potential bottom.

Trading volume was relatively high which indicated that it might see further downsides, as supported by the negative momentum seen in the bearish momentum on the MACD indicator.

This coming week, we expect prices to go down further and traders might initiate short positions.

Resistance lines will be positioned at 2,445 and 2,467, whereas support lines will be at 2,281, and 2,220. These levels will be observed in the coming week.

Major fundamental news this coming week
ITS, SGS and MPOB reports will be released on March 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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