Crude Palm Oil Weekly Report – December 8, 2018

Borneo Post FCPO Chart 8th December.

The Malaysia palm oil futures (FCPO) resumed earlier losses, down from a one-week low on Monday due to expectations of rising inventories in Malaysia and the temporary removal of Indonesia’s export levy.

On Friday, FCPO decreased 2.05 per cent to 1,998 as compared with last Friday’s closing price at 2,039, a total of 41 points.

Average trading volume went down from 48,287 contracts to 43,128 contracts from the previous week, a 11.96 per cent decline.

However, there was a 1.33 per cent increase to 245,534 contracts from 242,303 contracts in daily average open interest as compared with the previous week.

The latest AmSpec reported a decrease of 5.22 per cent in exports on November 1 to 25, a total of 1.039 million MT, from 1.097 million MT shipped during October 1 to 25.

Societe Generale de Surveillance (SGS) reported a decline of one per cent in Malaysian palm oil products export during November 1 to 25 at 1.074 millin tonnes from 1.085 million tonnes shipped during October 1 to 25.

Malaysia’s palm oil market continued to struggle from Indonesia’s decision to temporarily drop the export levy to zero from US$50 per tonne previously.

This announcement on Wednesday from the country’s finance ministry said that the country will not collect levies from palm exporters when prices are below US$570 per tonne, but will charge US$10 to US$25 a tonne once prices are in the range of US$570 to US$619 per tonne.

However, the levy will rise to US$20 to US$50 when prices hit above US$619 per tonne.

This move was to assist the country’s local oil palm farmers and boost exports, but it will cause Malaysia’s palm oil to be less price competitive.

A survey towards upcoming monthly data release from Malaysia Palm Oil Board (MPOB) showed that November production is expected to fall 2.1 per cent to 1.92 million tonnes, while exports are forecast to drop 10.6 per cent to 1.41 million tonnes.

As for palm oil inventories, the end-November’s inventories would likely to touch the three-million-tonne mark, its highest in recent years.

Hence, Malaysia’s palm oil will most likely remain in bearish sentiments until the current year end.

As for the crude oil, the prices continued to skid and fall further as the Organisation of the Petroleum Exporting Countries (OPEC) decided to delay the decision on output cuts, which they claimed that they are waiting support from non-OPEC heavyweight Russia to finalise the decision.

Palm oil prices are affected by movements in the crude oil, as it is used as feedstock to make biodiesel.

Spot ringgit appreciated 0.62 per cent to 4.1620 against the US dollar, compared with 4.1880 on last Friday. The dollar struggled to recover on the Asian trade on Friday, hobbled by fresh speculations that a widely expected rate hike later this month could be the last before the Federal Reserve hits the pause button on its tightening cycle.

Technical analysis

From the hourly chart, FCPO is trading sideways as the current market’s direction remains unclear.

However, from the daily chart, FCPO is still below both EMA 25 and EMA 50, indicating that the bear is still in control of the market. Overall, FCPO remains in bearish sentiment as traders may choose to hold back and wait for a clearer market direction before initiating new positions. In the coming week, FCPO might continue to trade higher. If FCPO fails to break above the first resistance level, it may trade towards the first support level.

Resistance lines will be positioned at 2,035 and 2,060, whereas support lines will be at 1,975, and 1,950. These levels will be observed in the coming week.

Major fundamental news this coming week

MPOB, AmSpec and SGS reports which will be released on December 10 (Monday).

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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