Sunday, October 7, 2012

Weekly Crude Palm Oil Report October 7 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives continuously tumbled for the third week due to the anticipation of rising palm oil stocks in the coming months.

The benchmark FCPO December contract plunged RM131 or 5.15 per cent to close at RM2,415 per tonne on Friday from RM2,546 per tonne last Friday.

The trading range for the week was from RM2,230 to RM2,560.

Total volume traded for the week amounted to 218,044 contracts, up 25,179 contracts from the previous week.

The open interest as at Thursday decreased to 134,362 contracts from 136,193 contracts the previous Thursday.

Cargo surveyor ITS released the palm oil export figures for the full month of September on Monday at 1,443,836 tonnes, a drop of 0.67 per cent while another surveyor SGS at 1,433,795 tonnes, an increase of 0.47 per cent from the same period last month.

A Reuters poll revealed on Friday that Malaysian palm oil stocks in September were expected to hit a record high at 2.46 million tonnes, a jump of 16.4 per cent from the previous month.

If this figure is realised in the next government monthly reports, it would surpass the previous record of 2.27 million tonnes set in November 2008.

According to the poll, palm oil exports were estimated to increase 5.8 per cent to 1.51 million tonnes while the production would surge 20 per cent to two million tonnes.

With such scenario, the exports growth was too low to offset the sharp rise in production, resulting the palm oil stocks to hit all-time record high.

The weekly crop progress report released by US Department of Agriculture (USDA) on Monday indicated the soybean crop harvest was reported 41 per cent complete, advancing from 22 per cent the previous week.

The soybean harvest in US was progressing well without much weather disruption at this current moment.
Some analysts estimated the US soybean production and yield would turn out to be better in the coming government monthly reports which would be released next week.

Palm oil prices got a lift during mid-week on bargain hunting after the market was deeply oversold.
The tropical oil prices was also supported when Malaysian Plantation Industries and Commodities ministry said on Thursday that they would propose to the cabinet to reduce crude palm oil export taxes from 23 per cent to between eight per cent to 10 per cent.

This move was aimed to position Malaysia to be more competitive in the international palm oil trading compared with the Indonesian rivals and to reduce the current high palm oil stocks level.

However, the hope of cutting crude palm oil export taxes faded when the Malaysian cabinet delayed taking any decision on the proposal on Friday.

Technical View
The benchmark December contract plunged to a new low of RM2,230 this week, a level not seen since November 2009.

We expect the market to fluctuate wildly at the current level with the radius of RM150 range next week.
However, the whole downtrend seemed not completed yet and more observation is needed.

Resistance would be pegged at RM2,570 and RM2,755 while support was set at RM2,393 and RM2,230.

Major fundamental news this coming week
MPOB’s monthly supply demand report on October 10, Malaysian export data for October 1 to October 10 by ITS and SGS on October 10 and USDA’s monthly supply-demand report on October 11.

- courtesy of OPF-

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