Malaysian palm oil futures (FCPO) ended higher by 0.45 per cent for the week even though investors booked profits from gains made earlier in the week as it went up to as high as 2,678. Meanwhile, prices were supported by optimism that higher biofuel mandates will encourage edible oil demand and support the tropical oil.
The new benchmark FCPO December contract settled at RM2,654 per tonne on Friday which was up by 12 points from last Friday at RM2,642. The trading range for the week was from RM2,602 to RM2,678. Total volume traded for the week amounted to 137,667 contracts which was down 57,049 contracts compared with last Friday’s 194,716 contracts. The open interest as of Thursday totalled 151,260 contracts from 154,077 contracts from previous Thursday, a decrease of 2,817 contracts.
Cargo surveyor Intertek Testing Services (ITS) reported exports of Malaysian palm oil products from November 1 to 25 declining 0.15 per cent to 1,229,580 tonnes from 1,231,393 tonnes shipped during October 1 to 25. Cargo surveyor Societe Generale de Surveillance (SGS) said on Friday that exports of Malaysian palm oil products for November 1 to 25 fell 2.3 per cent to 1,230,878 tonnes from 1,259,841 tonnes shipped during October 1 to 25.
Volumes were weak throughout the week despite profit taking activities but market players had expected industry officials and leading vegetable oil analyst to deliver a bullish palm oil outlook in Indonesia. Palm oil may benefit from Malaysia and Indonesia’s biodiesel policies as more tropical oil is needed to produce the greener fuel. During the Indonesia Palm Oil Conference and Price Outlook, leading analyst Dorab Mistry said the global biofuel demand is expected to increase by at least 2.5 million next year and price could reach to RM3,000 per tonne by March 2014. However, many investors believed that it would take more than just the biodiesel mandate to push palm prices as investors were also concern about the production level in both Malaysia and Indonesia. Malaysia is expected to produce four to 4.5 per cent more than 2012 while Indonesia may produce about 19.4 million tonnes in 2013 higher than the one it produced at 18.79 million tonnes in 2012.
Ringgit weakened throughout the week to its highest at 3.2380 on Thursday before it closed slightly stronger at 3.223 on Friday. However, concerns over MGS (Malaysian Government Securities in the form of bond) outflows due to the Federal Reserve quantitative easing tapering scheme may underpin the ringgit market bias to the upside. Normally, a weaker ringgit will increase demand from foreign buyers as they have to pay lesser to purchase palm oil.
Technical View
From the chart, price managed to rally till 2,678 as the correction reached 2,602 seem supportive which led to the rally for the week. Currently, we draw the support line (black line) to justify our bullish outlook. However, to solidify the current rally, price may have to break the 2,680 to 2,690 level. Failing to do so, price may revisit the small support at 2,630 and eventually test the trending support line.
For the coming week we pegged our important support levels at 2,630, 2,600, 2,565 and 2,506
Meanwhile, for our resistance levels, we pegged important ones at 2,700, 2,755, and 2,800
Major fundamental news this coming week
ITS & SGS Export reports – November 30 (Monday – December 2)
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