Malaysian palm oil erased last week’s gain, declining to its lowest level since August last year on concerns about rising production and growing stockpiles amid soft demand, while weakness in rival oils compounded the bleak picture.
The benchmark crude palm oil futures (FCPO) contract rose 2.27 per cent to RM2,458 on Friday, which was RM57 lower than RM2,515 recorded during the previous week.
The average daily trading volume during Monday to Thursday fell 19.19 per cent with a total of 183,585 contracts traded, as compared with 227,176 contracts traded during last Monday to Thursday.
However, daily open interest during Monday to Thursday increased 0.94 per cent to 241,693 contracts from 239,444 contracts during last Monday to Thursday.
Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products for December 1 to 20 declined two per cent to 874,022 tonnes, from 891,926 tonnes shipped during November 1 to 20.
SocieteGenerale de Surveillance (SGS) reported that exports of Malaysian palm oil products during December 1 to 20 fell two per cent to 865,309 tonnes from 882,943 tonnes shipped during November 1 to 20.
Palm oil output saw a seasonal decline at the year end before rising around the second quarter of the year. Output in November was last down 3.3 per cent on a monthly basis to 1.94 million tonnes, according to the most recent official data from industry regulator the Malaysian Palm Oil Board.
Stockpiles rose 16 per cent to 2.56 million tonnes, official government data showed last week, while demand fell nearly 12 per cent to 1.35 million tonnes in November. Demand for the tropical oil from key regions such as Europe and China usually decline at the end of the year as colder weather in the northern hemisphere solidify palm oil.
Spot ringgit appreciated 0.15 per cent to 4.08 against the US dollar, compared with 4.0865 last Friday.
Also underpinning the dollar, Congress approved the most significant US tax code overhaul in three decades that was expected to give at least a short-term lift to US’ solid economic growth.
According to the FCPO daily chart, the market pulled back from the Middle Bollinger Band and dipped to a 16-month low.
On Monday, Malaysian palm oil gapped-up and moved lower with the benchmark contract closing at RM2,527.
On Tuesday, Malaysian palm oil closed lower with the benchmark contract closing at RM2,518.
On Wednesday, Malaysian palm oil settled lower for second consecutive day, with the benchmark contract closing at RM2,504.
On Thursday, Malaysian palm oil gapped-down and traded lower, with the benchmark contract closing at RM2,449.
On Friday, Malaysian palm oil rebounded and settled slightly higher, with the benchmark contract closing at RM2,458. In the coming week, the market is expected to rebound from losses to form a double bottom if it fails to trade below RM2,420.
Resistance lines will be positioned at RM2,560 and RM2,600, whereas support lines will be positioned at RM2,425 and RM2,400. These levels will be observed in the coming week.
Major fundamental news this coming week
ITS and SGS reports will be released on December 25.
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.
Source: Borneo Post Online