Sunday, October 28, 2012

Weekly Crude Palm Oil Report October 28 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives ended the week higher on better export demand and short covering activities ahead of long holidays in Malaysia.

The benchmark FCPO January contract surged RM102 or 4.08 per cent to close at RM2,603 per tonne on Thursday from RM2,501 per tonne last Friday.

The trading range for the week was from RM2,497 to RM2,615.

Total volume traded for the week amounted to 127,826 contracts, down 71,522 contracts from the previous week.

The open interest as at Wednesday increased to 126,334 contracts from 125,799 contracts the previous Thursday.

Cargo surveyor ITS released the palm oil export figures for the period of October 1 to 25 on Thursday at 1,300,495 tonnes, a rise of 11.09 per cent while another surveyor SGS at 1,280,652 tonnes, an increase of 9.45 per cent from the same period last month.

On the supply side, some traders estimated the palm oil production in October would be slightly down to about five per cent.

The production during the fourth quarter 2012 should be toppish especially approaching the monsoon season end of the year.

An industry group in Indonesia indicated that the Indonesian government may cut its export tax for crude palm oil from 13.5 per cent to 10.5 per cent for November in its monthly adjustment for the export duty.
This may counter the effect by the Malaysian government to reduce its export tax for crude palm oil in its recent announcement.

The weekly crop progress report released by US Department of Agriculture on Monday indicated the soybean crop harvest was reported 80 per cent complete, advancing from 71 per cent from the previous week.

On the economic front, the manufacturing industry in China showed improvement with the data released on Wednesday was better than the market expectation.
This boosted the hope that the world second largest economy is recovering, and soon to demand for more commodities.

In addition, the US economic growth was also pointing to recovery with the latest third quarter gross domestic product data released was at two per cent, higher than the average analysts’ estimation of 1.8 per cent.

The coming November would be an interesting month as the world’s largest two economies, the US would be having presidential election, while China is in the transition of changing the country’s leader.
This may give lots of uncertainties and volatilities to the market movement towards the end of the year especially the measurements on the US financial fiscal cliff by the new president and the new policies by the new leaders to boost their country’s economy.

Technical View
The benchmark January contract continued to surge this week after the market broke the RM2,530 resistance.

Market is currently remained in the uptrend channel with strong resistance to be met in between RM2,634 and EMA50 line.

Focus would be put at this range as to see whether the market manages to break further up? We believe the market is going to correct soon before forming a strong base for the next uptrend.

Resistance would be pegged at RM2,634 and RM2,755 while support was set at RM2,361 and RM2,230.

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