Crude Palm Oil Weekly Report – 8 July 2017
Malaysian palm oil futures recorded the strongest gains in more than a month, rising in four consecutive days before rebounding slightly on Friday, tracking performance in rival edible oils on China’s Dalian Commodity Exchange and forecasts of lower production in June.
The benchmark crude palm oil futures (FCPO) contract up 4.03 per cent to RM2,554 on Friday, which is RM99 higher than RM2,455 reported in the previous week.
The average daily trading volume during Monday to Thursday fell 10.46 per cent with a total of 150,209 contracts traded, in contrast with 83,874 contracts traded during last Wednesday to Thursday.
Daily open interest during Monday to Thursday increased 0.15 per cent to 876,547 contracts from 437,637 contracts during last Wednesday to Thursday.
Data from the industry regulator, Malaysia Palm Oil Board (MPOB) will be released in the coming week. According to a Reuters poll, palm oil inventories in Malaysia are forecast to rise slightly in June as exports from the world’s secondlargest producer weaken. However, an unexpected drop in output capped stockpile gains. End-stocks are expected to slightly gain 0.2 per cent to 1.56 million tonnes from the previous month. This would be the lowest June stockpile levels since 2010.
The survey also forecast a drop in production at 1.62 million tonnes in June, down 2.1 per cent from 1.65 million tonnes in May. June production is seen as falling due to Eid-al-Fitr, the holiday which marks the end of Ramadan, as workers go on leave.
Exports last month are forecast to drop 8.2 per cent to 1.38 million tonnes, its first monthly drop in four months as seasonal demand ahead of the Muslim fasting month of Ramadan declined.
Spot ringgit depreciated 0.1 per cent to 4.2985 against the US dollar this week, compared to 4.2940 on last Friday. Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises, according to the minutes of the Fed’s last policy meeting on June 13 to 14 released on Wednesday.
On Monday, Malaysian palm oil futures rose, tracking strong gains in soyoil on the Chicago Board of Trade (CBOT) and related edible oils on China’s Dalian Commodity Exchange.
On Tuesday, Malaysian palm oil futures reversed earlier losses to make gains in the second half of trade, supported by forecasts of declining production which could impact local stock levels.
On Wednesday, Malaysian palm oil futures surged to more than a one-month high, on the back of forecasts for lower production in June.
On Thursday, Malaysian palm oil futures rose to its highest in over a month during the evening trade, charting a fourth consecutive day of gains, tracking strength in related edible oils on China’s Dalian Commodity Exchange.
On Friday, Malaysian palm oil futures market traded in sideways. The benchmark contract fell seven points and ended the day at 2,554.
Technical analysis
According to the FCPO daily chart, the market broke through the psychology resistance level of 2,500, hit the week-high of 2,575 and pared some gain on Friday. By the end of the week, the market closed at the upper Bollinger band. It could indicate a sign of overbought condition.
On Monday, Malaysian palm oil futures market rose up and traded higher. The benchmark contract ended at 2,504, which is 49 points higher than the previous closing price.
On Tuesday, Malaysian palm oil futures market recovered from its earlier losses during the late as the benchmark contract ended at 2,508, which is four points higher than previous closing price.
On Wednesday, Malaysian palm oil futures market rose significantly during the afternoon session. The benchmark contract gained 27 points and ended at 2,535, which is the highest level since May 29, 2017.
On Thursday, Malaysian palm oil futures market traded higher for three consecutive days as the market climbed earlier in the morning. The benchmark contract gained 26 points and ended the day at 2,561 which is the highest level since May 29, 2017.
On Friday, Malaysian palm oil futures were in line to break the winning streak of four straight sessions, weighed down by a weaker performance in soyoil on the Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange.
According to the chart, the market hit the upper Bollinger band, which indicates a bullish trend. However, the small body of candlestick on Friday showed the neither buyers nor seller could gain the upper hand. This indicates market might retrace slightly in the short term before continuing its uptrend.
Resistance lines will be positioned at 2,600 and 2,640, whereas support lines will be positioned at 2,475 and 2,450. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS, SGS and MPOB reports will be released on July 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.