Crude Palm Oil Weekly Report – 16 September 2017
Malaysian palm oil futures continued its bullish uptrend. It began to retreat from a six-month high on Thursday, as a strengthening ringgit and strong export figures cushioned the dampening effects of a rise in export tax for October.
The benchmark crude palm oil futures ( FCPO) contract rise 3.4 per cent to RM2,860 on Friday, which is RM94 higher than RM2,766 during the previous week.
The average daily trading volume during Monday to Thursday rose 21.84 per cent with a total of 243,705 contracts traded, in contrast with 150,012 contracts traded during last Tuesday to Thursday.
Daily open interest during Monday to Thursday inched down 0.27 per cent to 860,175 contracts from 646,880 contracts during last Tuesday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for September 1 to 15 increased 22.2 per cent to 625,655 tonnes, from 512,039 tonnes shipped during August 1 to 15.
Societe Generale de Surveillance (SGS) reported that exports of Malaysian palm oil products during September 1 to 15 increased 21.5 per cent to 652,350 tonnes from 537,002 tonnes shipped during August 1 to 15.
Monthly data from industry regulator, Malaysia Palm Oil Board (MPOB) showed that Malaysia’s palm oil stocks in August rose 8.79 per cent from July to 1.94 million tones.
It did not to breach the two million tonnes mark due to stronger- thanexpected exports of the commodity. Besides that, the production in August fell 0.9 per cent from July to 1.81 million tones and the exports rose 6.43 per cent to 1.49 million tonnes.
Palm oil output in Malaysia is seen as recovering in the second half of this year as the crop damaging effects of an El Nino weather pattern fades.
Moreover, demand for palm oil is expected to be well-supported in September ahead of major festivals in top consumer countries such as India and China, in the following month.
Spot ringgit appreciated 0.19 per cent to 4.1880 against the US dollar this week, compared to 4.1960 on last Friday. US dollar to ringgit opened lower at 4.1950 on Friday as the selling pressure heightens.
The Malaysian ringgit remained strong as markets still deem the currency undervalued.
On Monday, Malaysian palm oil futures jumped to their highest level since March, driven by a fall in production and higher exports that kept inventory numbers lower than expected.
On Tuesday, Malaysian palm oil futures rebounded on Tuesday after initial profit taking to record a second straight session of gains, as the market anticipated positive data from the US Department of Agriculture (USDA).
On Wednesday, Malaysian palm oil futures gained for the third straight session to hit its highest in more than six months, as trading breached the psychological barrier and the market was upbeat about the industry outlook.
On Thursday, Malaysian palm oil futures fell from a six and a half month highs, snapping three sessions of gains due to bearish price forecasts from a key industry analyst.
On Friday, Malaysian palm oil futures dipped, retreating further from a six-month high, as strong exports figures cushioned the dampening effects of a rise in export tax for October.
Technical analysis
According to the FCPO daily chart, the market climbed to break through the psychological level of 2,800 on Monday. It continued to move upward for another two trading days. After hitting a six-month high on Thursday, the market price began to pull back slightly.
On Monday, the Malaysian palm oil futures surged to more than five-month high, with the benchmark contract closing at 2,804, which is 38 points higher than the previous closing price.
On Tuesday, the Malaysian palm oil futures extended its rally for the second consecutive day, tracking more than a fivemonth high, with the benchmark contract closing at 2,830, 26 points higher than the previous closing price.
On Wednesday, the Malaysian palm oil futures continued to rise for the third consecutive days and surged to a sixmonth high, with the benchmark contract closing at 2,839, which is 43 points higher than the previous closing price.
On Thursday, the Malaysian palm oil futures traded lower after hitting a sixmonth high, with the benchmark contract closing at 2,864, which is nine points lower than the previous closing price.
On Friday, the Malaysian palm oil futures failed to trade any higher and ended the day in a negative territory, with the benchmark contract closing at 2,860, which is four points lower than the previous closing price.
As the market was overbought on Thursday, traders might be taking profits and making a retracement before the market continues to move northward. In the coming week, the market is expected to break through the psychological level of 2,900 and move upward.
Resistance lines will be positioned at 2,950 and 2,900, whereas support lines will be positioned at 2,800 and 2,742. These levels will be observed in the coming week.
Major fundamental news this coming week ITS and SGS reports will be released on September 20.
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.