Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives plunged this week due to the forecast of improved weather condition in US and the resurfacing of the eurozone debt crisis.
The benchmark FCPO
October contract tumbled RM115 or 3.78 per cent to close at RM2,927 per
tonne on Friday from RM3,042 per tonne last Friday. The trading range
for the week was from RM2,880 to RM3,008.
Total volume traded for
the week amounted to 171,868 contracts, up 21,547 contracts from the
previous week. The open interest as at Thursday increased to 106,686
contracts from 103,992 contracts the previous Thursday.
oil market suffered a double whammy this week as the weather forecast
indicated improved rains in the US drought stricken areas and the debt
crisis condition in Spain worsened approaching for seeking bailout.
moved across to most parts in the US Midwest this week, providing some
beneficial soil moisture for the crops. However, the amount of rains
needed was still light especially in the central and western of Midwest.
are very important in the coming few weeks to revive the potential
yield of soybean as the soybean crop is entering the crucial growing
phase of pods setting and filling.
The rains event this week was
only temporary bringing relief from the current heat and dryness stress
to soybean crop and the crop condition would be very much dependant on
the weather condition these coming few weeks.
The latest weather
forecast report indicated the warm and dry weather would return in the
US next week coupled with limited rains sighted sparked the traders to
short cover and added back some risk premium to soybean prices before
the week ended.
The weekly crop progress released by US Department
of Agriculture (USDA) on Monday indicated the crop condition in the US
further deteriorating. The soybean crop was 31 per cent in good to
excellent condition, reducing from 34 per cent the previous week.
The palm oil export demand remained weak even though there was a slight improvement in the latest exports data released.
surveyor ITS released the palm oil export figures for the period of
July 1 to July 25 on Wednesday at 1,026,153 tonnes, a drop of 14.25 per
cent while another surveyor SGS at 986,829 tonnes, a fall of 18.6 per
cent from the same period last month.
With the weak exports demand
currently, some traders anticipated the palm oil stocks would be easily
cross above 1.8 million tonnes from 1.7 million tonnes in the previous
month as they forecasted the production in July would increase double
benchmark October contract had broken our major support at RM2,970 to
RM3,000 levels this week which had turned the market from bull to
Weather in the US would remain the main focus in the
coming weeks’ price movement and the market could be volatile as what we
had mentioned last week.
If hot and dry weather persisted, the
market would be very likely to break above RM3,000 again but if timely
rains could reach most of the needed dry areas in the US, the market may
test the previous low of RM2,838.
Resistance was pegged at RM2,986 and RM3,067 while support was set at RM2,838 and RM2,754.
Major fundamental news this coming week
Malaysian export data for full month of July by ITS and SGS on July 31.