Crude Palm Oil Weekly Report – 29 July 2017
This week, Malaysian palm oil futures surged and hit the strongest gain since April 2017, on expectations of lower than forecast production in July, backed by a strong gain in rival soyoil on the Chicago Board of Trade (CBOT) and steady stockpiles.
The benchmark crude palm oil futures ( FCPO) contract up 3.15 per cent to RM2,653 on Friday, which is RM81 higher than RM2,572 during the previous week.
The total trading volume from Monday to Thursday rose 44.23 per cent with 198,104 contracts traded, comparing with 137,357 contracts traded during last Monday to Thursday.
However, total open interest from Monday to Thursday dropped 1.04 per cent to 859,305 contracts from 868,330 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that export of Malaysian palm oil products for July 1 to 25 rose 3.2 per cent to 1.017 million tonnes, from 985,534 tonnes shipped during June 1 to 25.
Societe Generale de Surveillance (SGS) reported that export of Malaysian palm oil products during July 1 to 25 rose 4.8 per cent to 1.044 million tonnes from 996,291 tonnes shipped during June 1 to 25.
Both cargo surveyor data showed rising export demand for palm oil related products.
Palm oil production in Malaysia, the second- largest producer of palm oil, is seen rising in the second half of the year, but gains could be limited by the lingering impact of the crop-damaging El Nino in 2015.
Production in 2017 is estimated to reach between 18.7 million tonnes and 19.5 million tonnes, up by about 10 per cent from 2016 levels but below the record high of 19.96 million tonnes in 2015.
Spot ringgit appreciated 0.13 per cent to 4.28 against the US dollar, compared to 4.2855 last Friday.
The Malaysian ringgit rebounded against the US dollar, boosted by the Federal Reserve’s decision to keep its interest rates low. While the dollar had been supported by the Fed’s gradual policy tightening since late 2015, it is perceived that interest rate advantage is eroding as many other central banks have started looking to winding back their stimulus in recent months.
On Monday, Malaysian palm oil futures posted their worst session in a week, tracking weaker performances in rival oils.
On Tuesday, Malaysian palm oil futures surged nearly three per cent to a twomonth high in the evening, supported by expectations of lower than forecast production in July and tracking strong gains in soyoil on the Chicago Board of Trade (CBOT).
On Wednesday, Malaysian palm oil futures recovered from the earlier session of losses, hitting a two-month high in the evening as it tracked gains in rival soy oil seed on the Chicago Board of Trade (CBOT).
On Thursday, Malaysian palm oil futures hit their highest in nearly four months, supported by gains in rival soy oilseed on the Chicago Board of Trade and as stock levels remained steady.
On Friday, Malaysian palm oil futures reversed the previous session’s gains and fell, weighed down by a stronger ringgit, while mild-profit taking also began to set in.
Technical analysis
According to the FCPO daily chart, the market pulled back after it hit the weekhigh of 2,692. After three consecutive days of gain, the market retraced slightly from the week-high and was retained at the upper Bollinger band.
On Monday, Malaysian palm oil futures pared its losses during the late trade, with the benchmark contract closing at 2,556, which is 16 points lower than the previous closing price.
On Tuesday, Malaysian palm oil futures surged to a nine-week high during the late trade, with the benchmark contract closing at 2,625, which is 69 points higher than the previous closing price.
On Wednesday, Malaysian palm oil futures traded higher for three consecutive days and surged to a twomonth high during the late trade, with the benchmark contract closing at 2,633, which is eight points higher than the previous closing price.
On Thursday, Malaysian palm oil futures traded higher for four consecutive days and surged to a near four-month high during the late trade, with the benchmark contract closing at 2,675, which is 42 points higher than the previous closing price.
On Friday, Malaysian palm oil futures traded lower as investors took profit after strong gains seen in two weeks.
The benchmark contract closed at 2,653, which is 22 points lower than the previous closing price.
According to the chart above, the market fell slightly after it broke through the upper Bollinger band.
In the coming week, the market is expected to test at the psychological level of 2,700.
Breaking out of this level might indicate a continuation of strong bullish trend. The market will retrace if it failed to trade above this resistance level.
Resistance lines will be positioned at 2,720 and 2,770, whereas support lines will be positioned at 2,590 and 2,510. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on July 31.