Sunday, October 21, 2012

Weekly Crude Palm Oil Report October 21 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended fl at this week, digesting the impact of newly announced export tax structure by the Malaysian government and analysing the mixed views by the top industry analysts during an industry conference on Tuesday.

The benchmark FCPO December contract rose RM1 or 0.04 per cent to close at RM2,501 per tonne on Friday from RM2,500 per tonne last Friday.

The trading range for the week was from RM2,417 to RM2,524.

Total volume traded for the week amounted to 199,348 contracts, down 4,237 contracts from the previous week.

The open interest as at Thursday decreased to 125,799 contracts from 141,841 contracts the previous Thursday.

After the announcement on the new crude palm oil export tax structure by the Malaysian government last Friday, palm oil producers requested the government to reconsider issuing tax-free crude palm oil quota especially to those companies which have refineries overseas.

These companies were depending on the tax-free crude palm oil export quota to maintain the profits of their refineries overseas.

With the abolishment of the tax-free crude palm oil export quota, it would definitely erode some of their gains and competitiveness in other regions.

Dorab Mistry, one of the leading edible oils’ analysts, said in an industry conference on Tuesday that palm oil prices could fall to RM2,200 per tonne within the next four to six weeks due to high palm oil stocks in Malaysia which may exceed three million tonnes by end of this year.

Another renowned analyst, Thomas Mielke, maintained his view that the wide discount between palm oil and other vegetable oils’ prices was unsustainable due to shortage in other vegetable oils supplies which would increase the demand for palm oil to fill the supply gap.

He forecasted palm oil prices to recover to RM3,300 per tonne somewhere in March to May next year.
Another analyst, Dr James Fry, said the premium of palm oil prices over crude oil prices in Europe collapsed from approximately US$300 per tonne at the beginning of this year to nearly par recently could boost the appeal to use palm oil as the feedstock to produce biodiesel.

According to Fry, the narrow price difference between palm oil and crude oil currently would become more feasible to produce biodiesel and direct burning of vegetable oils without any subsidy by the local government.

Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 15 on Monday at 769,534 tonnes, a jump of 13.15 per cent while another surveyor SGS at 768,550 tonnes, a surge of 16.28 per cent from the same period last month.

The Malaysian market will be closed on Friday celebrating Hari Raya Haji.
Technical view
The benchmark January contract ended fl at this week and met a strong resistance at RM2,530 level despite strong export growth for the first half of October.

In our opinion, the current rebound may end around this level and the failure to break above RM2,530 level next week will bring palm oil price down again for the last wave to form the bottom of the downtrend.
Resistance would be pegged at RM2,530 and RM2,634 while support was set at RM2,361 and RM2,230.

Major fundamental news this coming week
Malaysian export data for October 1 to October 20 by SGS on October 22 and the export data for October 1 to October 25 by ITS and SGS on October 25.

-Courtesy of OPF-

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