Crude Palm Oil Weekly Report – May 20, 2017
Malaysian palm oil futures was in the consolidation phase after hitting more than a month-high ahead of export data due on coming Monday.
Though export data is expected to be positive as demand of palm oil is usually high before the Ramadan festivals, the market is more cautious, tracking the movements of weaker soyoil on the Chicago Board of Trade (CBOT).
Benchmark crude palm oil futures (FCPO) for August delivery contract slipped 0.75 per cent to close at RM2,635, RM20 lower comparing with RM2,655 recorded last Friday.
Average daily trading volume during Monday to Thursday surged 12.65 per cent with a total volume of 225,905 contracts traded, compared with a total volume of 150,398 contracts traded during the same period in the previous week.
However, the average daily open interest over Monday to Thursday down 6.47 per cent to a total of 821,616 contracts, compared with 658,871 contracts during the same period in the previous week.
Intertek Testing Services (ITS) reported that shipment of Malaysian palm oil products during May 1 to 15 rose 8.89 per cent to 617,697 tonnes from 567,280 tonnes shipped during April 1 to 15.
Societe Generale de Surveillance (SGS) reported that shipment of Malaysian palm oil products during May 1 to 15 was up 7.08 per cent to 613,465 tonnes from 572,910 tonnes shipped during April 1 to 10.
Both cargo surveyors’ reports showed an upbeat export data ahead of the Ramadan festival. The lower than expected production growth has also retained the palm oil’s upward momentum since it rebounded from more than a year low last month.
According to a circular from the industry regulator, Malaysian Palm Oil Board (MPOB), the crude palm export tax would be lower for the third consecutive month to six per cent in June, which is positive for Malaysian palm oil market.
This week, spot ringgit appreciated to 4.3215 against the US dollar, strengthening 0.61 per cent compared with the ringgit performance last Friday.
Year-to-date, it appreciated 3.63 per cent from 4.4845. The dollar weakened this week after two US officials said President Donald Trump disclosed highly classified information to Russia’s foreign minister about a planned Islamic State operation.
On Monday, Malaysian palm oil futures climbed on Monday as market sentiments rose alongside higher exports figures ahead of the festivities, and firm soyoil prices provided support.
On Tuesday, Malaysian palm oil futures edged up a fraction on Tuesday as the market rebounded from earlier profit taking, driven by a drop in production figures.
On Wednesday, Malaysian palm oil futures registered its sharpest daily gains in a week, rising 1.3 per cent in the evening due to strong local and overseas demand.
On Thursday, Malaysian palm oil futures fell in the evening, tracking weaker soyoil on the Chicago Board of Trade and other related edible oils on China’s Dalian Commodity Exchange.
On Friday, Malaysian palm oil futures rebounded from early losses, rising for a second session on expectations of an increase in export demand. Technical analysis
Referring to palm oil futures daily chart, the market traded in sideways movement after the August delivery contract as the benchmark contracted.
Thus, a stronger catalyst could cover the gap created by the previous rollover.
On Monday, Malaysian palm oil futures edged up to more than a month high, the benchmark July contract gained 32 points and closing at 2,683.
On Tuesday, Malaysian palm oil futures traded in sideways movement.
The active month August delivery contract recovered from earlier losses during late-afternoon trade and ended the day at 2,610, one point lower than the previous closing price.
On Wednesday, Malaysian palm oil futures broke out to trade on the upside. The active month contract gained 31 points and closing at 2,641.
On Thursday, Malaysian palm oil futures erased its previous gains. The active month contracted down 15 points, and closing at 2,628.
On Friday, Malaysian palm oil futures were trading in sideways movement. The active month contract recovered from its earlier losses and closed at 2,635, nine points higher than its previous settlement price on Friday.
This coming week, the market would likely trade towards the psychological resistance at 2,700.
Failing to break this level would lead the market to fall back to the nearest psychological price of 2,600. It is expected trade in the range of 2,570 to 2,740.
Resistance lines would be positioned at 2,700 and 2,735, while support lines would be positioned at 2,600 and 2,570. These levels will be observed in the coming week. Major fundamental news this coming week
ITS and SGS reports will be released on May 22.
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.