Sunday, September 9, 2012

Weekly Crude Palm Oil Report September 9 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week sharply lower due to the anticipation of higher palm oil stocks level in August and the current US weather condition had stabilised the crop from further deteriorating.

The benchmark FCPO November contract plunged RM92 or 3.05 per cent to close at RM2,927 per tonne on Friday from RM3,019 per tonne last Friday.

The trading range for the week was from RM2,895 to RM3,100.

Total volume traded for the week amounted to 196,597 contracts, up 60,870 contracts from the previous week.

The open interest as at Thursday decreased to 114,039 contracts from 126,836 contracts the previous Thursday.

Most traders liquidated some riskier positions in the palm oil market ahead of the major fundamental reports to be released next week.

A Reuters poll revealed on Wednesday indicating that Malaysian palm oil stocks were expected to increase 4.5 per cent to 2.09 million tonnes in August from the previous month as the high production outpaced the rise in exports.

According to the poll, the palm oil exports were estimated to surge 11.8 per cent to 1.45 million tonnes while the production would fall three per cent to 1.64 million tonnes.

One of the top industry analysts, Dorab Mistry provided his view on palm oil prices during the Global Commodities Conference – Asia 2012 in Singapore on Thursday saying that palm oil prices was hard to be bullish given the record palm oil stocks and high production cycle currently which would be expected to hit new peaks in September and October.

He pegged the palm oil prices to be trading between RM2,900 to RM3,300.

Cargo surveyor SGS released the palm oil export figures for the full month of August on Tuesday at 1,427,052 tonnes, a surge of 19.6 per cent from the same period last month.

Most of the rise in exports was mainly to India and China which showed an increase of 81 per cent and 43 per cent respectively compared with the previous month.

The European Central Bank (ECB) unveiled a new bond-buying program named as Outright Monetary Transactions (OMT) on Thursday to ease the eurozone debt crisis.

The announcement by the ECB immediately pressured the Spain and Italian bond yield and triggered the global equities to surge more than two per cent the same day.

The next focus would be on the Federal Open Market Committee meeting which was scheduled on September 12 to 13 on the possibility of any quantitative easing programs to be announced given the disappointing US jobs data released on Friday.

Technical View
The benchmark November contract was noted to face resistance at RM3,100 level and the inability to rise further from that level especially to cross above the EMA 200 line pressured the palm oil market to fall back forming a more complex consolidation phase which may drag for another couple of weeks before a clearer trend is noted.

The red line support will be closely monitored and more observation needed to see how the chart pattern developed from here.

Resistance would be pegged at RM3,193 and RM3,270 while support was set at RM2,895 and RM2,820.

Major fundamental news this coming week
MPOB’s monthly supply demand report on September 10, Malaysian export data for September 1-10 by ITS and SGS on September 10 and USDA’s monthly supply-demand report on September 12.

Courtesy of OPF

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