Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply higher due to the optimism of increasing demand in the coming months and short covering activities ahead of the holiday season end of the year.
The benchmark FCPO March contract surged RM133 or 5.84 per cent to close at RM2,409 per tonne on Friday from RM2,276 per tonne last Friday.
The trading range for the week was from RM2,296 to RM2,410.
Total volume traded for the week amounted to 157,246 contracts, down 30,991 contracts from the previous week.
The open interest as at Thursday increased to 159,084 contracts from 158,436 contracts the previous Thursday.
Palm oil market was cheered by the announcement from the Malaysian government on Monday that its crude palm oil export tax for January would be set at zero per cent in line with the analysts’ expectation the week earlier.
Such move would be able to boost demand for crude palm oil from those countries that are price-sensitive to vegetable oils like India, China and Pakistan.
This would also open up the opportunities for other palm oil suppliers to sell crude palm oil to overseas buyers without the restrictions of free export tax quota for crude palm oil which is only available to certain suppliers in Malaysia.
Cargo surveyor ITS released the palm oil export figures for the period of December 1 to 20 on Thursday at 1,004,159 tonnes, a slip of 1.89 per cent while another surveyor SGS at 1,015,440 tonnes, a slight increase of 0.50 per cent from the same period last month.
On the other hand, the soybean prices were under pressure this week as China had cancelled a total of 840,000 tons of soybean shipments this week.
The Chinese soybean importers expected the soybean prices would be ease from the current level with the anticipation of record soybean plantings from South America.
The weather in Brazil was favourable so far but the weather in Argentina was a bit wetter, slowing down the crop planting progress in key producing areas.
The current scenario may narrow the deep discount between palm oil and soybean oil prices which is hovering at US$350 per ton currently.
The Malaysian palm oil production may have a double digit fall in December as heavy rains disrupted the harvesting and transportation of the tropical oil.
On the economic front, the US fiscal cliff will still be on focus as it is approaching the expiry end of this year.
Most analysts viewed that the US policy makers would be able to close the deal to avert the fiscal cliff.
The Malaysian market will be closed on Tuesday celebrating Christmas day.
The benchmark March contract finally broke up from the consolidation phase on Friday after the market had nicely covered most of the gap left in the chart due to change of month.
This breakout confirmed the market is ready for a rally soon. The target for this rally would be set at RM2,745 to RM2,820 levels.
Resistance would be pegged at RM2,490 and RM2,634 while support was set at RM2,350 and RM2,220.
Major fundamental news this coming week
Malaysian export data for December 1 to 25 by ITS and SGS on December 26.
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.