Crude Palm Oil Weekly Report – September 13, 2014

by Oriental Pacific Futures. Posted on September 13, 2014, Saturday

Malaysian palm oil futures climbed higher on Friday to 2084, due to increasing crude palm oil overseas demand.
Futures Crude Palm Oil (FCPO) benchmark November 2014 contract settled at 2084 which was up 56 points or 2.76 per cent from 2,028 last Friday.  Trading volume decreased to 136,326 contracts from Tuesday to Thursday from 175,675 contracts totalled from last Tuesday to Thursday. Open interest based increased to 855,302 contracts from Tuesday to Thursday from 841,957 contracts from last Tuesday to Thursday.
Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products for the first 10 days of September rose by 40.6 per cent to 487,955 compared with 347,094 during the first 10 days of August.
Societe Generale de Surveillance’s (SGS) report (September 10, 2014) revealed that palm oil exports increased 36.1 per cent to 484,330 for the first 10 days of August compared with 355,874 during the first 10 days of July.
Spot ringgit eased on Friday to 3.196, after reaching a week high at 3.204. The ringgit weakened the most since April due to increasing expectation that the US Fed will introduce new interest rates earlier than expected. Earlier during the week, the dollar reached a 14-month high, as the US economy continues to improve.
On Thursday, the ringgit weakened the most out of all Asian currencies amid speculation the central bank will raise interest rates for the second time this year. Bank Negara Malaysia will convene on September 18.
Earlier, the ringgit fell by 0.9 per cent, the most in eight months, according to Reuters.  This week, the weakening ringgit supported the CPO price for most of the week.
On Monday, it was reported that unfavourable weather, severe frost, could harm key corn and soy harvesting regions in the US, which supported palm oil prices, according to Reuters.
A report from the MPOA showed the production reached a record level in August and could cause stocks to end above two million tonnes. The MPOB reported that Malaysian palm oil stocks at the end of August increased by 21.9 per cent to 2.05 million tonnes compared with 1.684 million tonnes during July, due to crop friendly weather coupled with less demand.
Many investors believe the government expected this considerable increase in stockpiles and production, and therefore implemented the exemption of export duty for palm oil for two months last week, to try and motivate overseas buyers.
The USDA report showed bearish soybeans production which beat estimates at 3.913 billion bushel, while stocks rose by 45 million to 475 billion bushel. On Thursday, soybean prices dipped below US$10 per bushel, a four-year low, as investors anticipate a USDA report to show soybean production and supplies could reach a higher than expected record levels.  In addition, investors are wary that Indonesian government could cut export tax next month, which could harm Malaysian exports.

Technical analysis
According the daily FCPO chart, on Monday, the price reached their highest level in three weeks due to concerns on the extreme weather in comparative oil-producing countries. However, traders remained anxious as the price remained in the oversold region, coupled with an exempt in CPO export duty for two months, the price closed above 2,040.
On Tuesday, the price closed lower as investors waited for data on Malaysian palm oil stocks and production levels. The market closed below 2,040. On Wednesday, the price remained flat due to decreasing prices in overseas vegetable oils, but reports released showed an increase in exports, which halted the bearish sentiment.
On Thursday, the price broke the middle bollinger band and reached a new three week high as investor sentiment picked up due to increasing export demand. However, sentiment was countered by investors reacting to news inventories moved above two million tonnes, which halted gains. On Friday, the price rose due to stable soyoil markets and the reported increase in overseas exports, according to Reuters, the price tested resistance line 2,090 and closed below.
Since the price closed below resistance line 2,090, there is potential for the price to climb higher, with potential to break above 2,100.  The bollienger band is narrowing, wait for upper or lower bollienger band to expand again, until then will range between 2,100 and 2,000.
Resistance lines will be placed at 2,090 and 2,120, while support lines will be placed at 2,050 and 2,020, these will be observed.

Fundamental analysis
ITS and SGS report on September 15, 2014 (Monday).

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

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