Crude Palm Oil Ends Down, At Crucial Support Level

Crude palm oil futures on Malaysia’s derivatives exchange weakened Thursday to close at a key support level as declines in crude oil and soyoil futures weighed on sentiment, trade participants said.

Still, traders said a sustained break below the immediate support isn’t likely this week as market participants are reluctant to make big bets with many investors sidelined during the week-long holiday in China.

The benchmark May CPO contract on the Bursa Malaysia Derivatives ended MYR28 lower at MYR2,600 a metric ton, a crucial psychological support level, after trading in a narrow range of MYR2,600-MYR2,617.

The Chinese are the biggest buyers of CPO, and with Chinese markets still closed for the Lunar New Year celebrations, trade was sluggish and investors looked more to external cues rather than to generally supportive supply-demand fundamentals.

As crude oil and soyoil futures headed lower during Asian trading hours, CPO prices followed suit.

Towards the end of trade on the BMD, crude oil futures on the New York Mercantile Exchange were down $0.79 at $75.48 a barrel.

March soyoil futures on the electronic Chicago Board of Trade were down 15 points at 38.60 cents a pound.

“Apart from thin trade resulting in prices not moving all that much, CPO prices didn’t breach the MYR2,600 support as bullish local fundamentals such as falling production mean supply might be affected in the near future,” said a Kuala Lumpur-based trader.

Traders estimate production is likely to fall by around 10% in February and even more in March.

“Many participants are waiting for the Chinese to return to the market before making any moves. Perhaps by next week we’ll have a better picture of where CPO price levels should be, but there’s a strong likelihood the support level of MYR2,600 will hold this week,” another Kuala Lumpur-based trader said.

In the cash market, palm olein for April/May/June delivery traded at $800/ton, a Singapore-based trader said.

Cash CPO for prompt shipment was offered MYR20 lower at MYR2,630/ton.

Open interest on the BMD was 81,347 lots Thursday, up from 79,210 lots Wednesday. One lot is equivalent to 25 tons.

Some 9,967 lots of CPO were traded versus 14,161 lots Wednesday.

Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT:

Month      Close    Previous   Change    High    Low
Mar 2010   2,619    2,627      Dn 8      2,623   2,614
Apr 2010   2,604    2,620      Dn 16     2,620   2,604
May 2010   2,600    2,628      Dn 28     2,617   2,600
Jun 2010   2,600    2,615      Dn 15     2,610   2,600