Sunday, November 18, 2012

Weekly Crude Palm Oil Report November 18 2012

Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives soared this week due to the lower than expected palm oil stocks build-up in October.

The benchmark FCPO February contract surged RM113 or 4.88 per cent to close at RM2,429 per tonne on Friday from RM2,316 per tonne last Thursday.

The trading range for the week was from RM2,220 to RM2,439.

Total volume traded for the week amounted to 114,447 contracts, down 84,482 contracts from the previous week.

The open interest as at Wednesday increased to 139,876 contracts from 138,208 contracts the previous Thursday.

MPOB released its bullish monthly reports on Malaysian palm oil’s supply and demand for October 2012 on Monday with palm oil stocks were slightly higher at 2.509 million tonnes, an increase of 1.11 per cent from the previous month and was far below the average estimation of the Reuter’s poll at 2.67 million tonnes.
The exports in October jumped 16.16 per cent to 1.758 million tonnes while the palm oil production reduced 3.28 per cent to 1.938 million tonnes.

The high palm oil exports were mainly contributed by the European Union countries with an increase of 70 per cent in their palm oil imports in October compared with the previous month.

The higher exports demand and lower production growth managed to slowdown the build-up in palm oil stocks in October.

If this trend continues in the coming month, the palm oil stocks will start turning down from the record high levels.

Cargo surveyor ITS released its latest palm oil export figures for the period of November 1 to November 15 on Friday at 769,087 tonnes, a slip of 0.06 per cent from the same period last month.

The exports growth in the last five days of November was sluggish probably due to two public holidays this week.

The Malaysian market was closed on Tuesday and Thursday, celebrating Deepavali and Awal Muharram respectively.

However, both cargo surveyors, ITS and SGS released good export data for the first ten days of November.
ITS indicated the export figures for the period of November 1 to November 10 on Monday at 518,688 tonnes, a surge of 15.62 per cent while another surveyor SGS at 514,798 tonnes, a jump of 22.35 per cent from the same period last month.

The rise in palm oil exports this month was mainly contributed by China as the Chinese importers were scrambling to stock up the refined palm products before the Chinese government implements stricter specifications on refined palm oil’s quality effective from January 1, 2013 onwards.

The increase in exports to China would be expected to extend until the end of this year with the estimation of more than 700,000 tonnes of palm oil would be exported to the country each month in November and December.

Technical View
The benchmark February contract surged this week after the market briefly broke the low of RM2,230 to reach the new low of RM2,220.

Thereafter, the market rebounded more than RM200 from the new low due to short covering activities.
In our view, the market is currently forming a bottom for the next rally.

Resistance would be pegged at RM2,490 and RM2,634 while support was set at RM2,220 and RM2,130.

Major fundamental news this coming week
Malaysian export data for November 1 to November 5 by SGS on November 19 and the export figure for November 1 to November 20 by ITS and SGS on November 20.

- Courtesy of OPF-

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