Crude Palm Oil Weekly Report – April 7, 2018

Malaysian palm oil futures achieved a fresh one-month high due to declining stockpiles end-March and strengthening related edible oils as well as firm demand.

The new tariff retaliation from China against US also boosted the market.

The benchmark crude palm oil futures (FCPO) contract rose 3.12 per cent to RM2,503 on Friday, which was RM78 higher than RM2,425 during the previous week.

The average daily trading volume during Monday to Thursday increased 20.43 per cent with a total average of 43,721 contracts traded, as compared with total average of 34,790 contracts traded during last Monday to Thursday.

Daily average open interest during Monday to Thursday decreased 0.7 per cent to 227,479 contracts from 229,020 contracts during last Monday to Thursday.

AmSpec reported that exports of Malaysian palm oil products for March rose 21.6 per cent to 1.391 million tonnes, from 1.145 million tonnes shipped during February.

Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during March rose 19.4 per cent to 1.395 million tonnes from 1.168 million tonnes shipped during February.

The Muslim holy month begins mid-May, and this usually causes higher usage of cooking oil as devotees break day-long fasts with communal feasting.

Palm oil is commonly used to make cooking oil and the demand for it in Muslim-populated regions grows a month before Ramadan.

Malaysian palm oil exports in March rose 19 to 21 per cent on a monthly basis, according to data from inspection company AmSpec Agri Malaysia and cargo surveyor Societe Generale de Surveillance.

Also, news of China’s increase in tariffs by up to 25 per cent on 128 US products including soybeans also lent support to the market. Spot ringgit depreciated 0.25 per cent to 3.8715 against the US dollar, compared to 3.8620 on last Friday.

The dollar edged higher on Friday, heading for a second week of gains, as investors cut some bets against the currency before monthly US payrolls data that may signal price pressures are growing in the world’s biggest economy.

Technical analysis

According to the FCPO daily chart, FCPO gained to a new one month high despite Tuesday’s decline which offset gains.

On Monday, FCPO ended at 2,459, 34 points higher than the previous close of 2,425, with a traded volume of 17,152.

On Tuesday, FCPO ended at 2,437, 22 points lower than the previous close of 2,459, with a traded volume of 15,387. On Wednesday, FCPO ended at 2,453, 16 points higher than the previous close of 2,437, with a traded volume of 35,780.

On Thursday, FCPO ended at 2,468, 15 points higher than the previous close of 2,453, with a traded volume of 14,277.

On Friday, FCPO ended at 2,503, 35 points higher than the previous close of 2,468, with a traded volume of 24,788.

Based on the daily candlesticks chart, despite wild volatility (Trade war between China and US) which dented FCPO gains, it managed to rebound and further went north to test first resistance at 2,510 points.

Should the price failed to break above this level, it may rebound to the first support level. In the week ahead, traders may hold their current positions as the market direction is unclear and difficult to trade.

Resistance lines will be positioned at 2,510 and 2,568, whereas support lines will be at 2,383, and 2,350. These levels will be observed in the coming week.

Major fundamental news this coming week

AmSpec, SGS, and MPOB reports will be released on April 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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