Monday, March 8, 2010

Crude Palm Oil Ends Up; Market Expects Bullish Forecasts

Crude palm oil futures on Malaysia’s derivatives exchange ended higher Monday as participants anticipated bullish news from a palm oil conference due to start tomorrow, trade participants said.

The benchmark May contract on the Bursa Malaysia Derivatives ended MYR39 higher at MYR2,709 a metric ton, after trading in a range of MYR2,675-MYR2,722/ton.

Higher crude oil and soyoil futures in after-hours trade also provided support for CPO prices, enabling prices to settle above today's resistance level of MYR2,700.

Noted vegetable oils analyst Dorab Mistry is expected to speak tomorrow at the conference in Kuala Lumpur.

"There's a feeling Mistry may forecast CPO prices to rise to MYR3,000/ton this year. This is fuelling a bullish sentiment in the market and many are eager to push CPO prices up in anticipation of such a positive forecast," said a Singapore-based trader.

Traders said CPO prices are likely to rise this week and should hold above MYR2,700 but cautioned that prices may fall after the excitement over the conference dies.

"Analysts like Mistry and (Thomas) Mielke have been notoriously bullish about the vegoils market the last few years, and they've succeeded in whipping market participants into a frenzy with their forecasts, but the initial price rises are usually followed by a fall in prices once the excitement dies and fundamentals weigh in," a Kuala Lumpur-based trader said.

Traders said CPO prices are likely to remain bullish this month as production remains lower versus the previous month, but exports may be weak due to a lack of festive celebrations to fuel purchases.

"Production is likely to rise next month and if exports continue to be weak, the market will be hard pressed to push CPO prices to MYR3,000," said another Kuala Lumpur-based trader.

Traders said analysts such as Mistry and Mielke are likely to forecast bullish CPO prices based on their estimates that countries like Malaysia, the world's second-largest producer of palm oil, will see a decline in production.

"Even if that may be true, Indonesia's production will likely make up for Malaysia's shortfall. Both countries together make up a sizeable chunk of the world's vegoil production and with soyoil production tipped to be on the rise, global vegoil output should correspond with any increases in demand," a Singapore-based trader said.

In the cash market, palm olein for March was offered at $840/ton.

Cash CPO for prompt shipment was offered MYR40 higher at MYR2,720/ton.

Open interest on the BMD was 81,795 lots Monday, up from 81,079 lots Friday. One lot is equivalent to 25 tons.

A total of 6,388 lots of CPO were traded versus 17,321 lots Friday.

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

Month Close Previous Change High Low
Mar 2010 2,710 2,676 Up 34 2,710 2,690
Apr 2010 2,718 2,677 Up 41 2,725 2,691
May 2010 2,709 2,670 Up 39 2,722 2,675
Jun 2010 2,703 2,664 Up 39 2,706 2,662

(END) Dow Jones Newswires

March 08, 2010 05:56 ET (10:56 GMT)

No comments:

Post a Comment