Malaysian palm oil futures edged lower on Friday to 2,171, due to weakening crude oil prices.

Futures Crude Palm Oil (FCPO) benchmark for February 2015 contract settled at 2,171, down two points or 0.09 per cent from 2,173 last Friday.

Trading volume decreased to 186,242 contracts from 207,493 contracts from last Monday to Thursday.

Open interest based on decreased to 768,805 contracts from 801,672 contracts from last Monday to Thursday.

Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products during December 1 to 10 increased 1.7 per cent to 407,425 tonnes compared with 400,614 tonnes during November 1 to 10.

In a separate report, Societe Generale de Surveillance (SGS) stated that Malaysia’s palm oil exports during December 1 to 10 increased 0.2 per cent to 395,929 tonnes compared with 395,249 tonnes during November 1 to 10.

Overall, demand from the EU and the US remained steady, while demand from China and India decreased.

Spot ringgit weakened on Friday to 3.494, due to decreasing crude oil prices.  The Malaysian Palm Oil Board (MPOB) report showed that palm oil output in November decreased 7.52 per cent from October, which was more than expected, due to the continuing monsoon season.

While end stocks increased 5.16 per cent, the largest increase in 21 months, which could pile pressure on the price of crude palm oil. Finally, exports decreased 6.11 per cent.

According to Reuters, Indonesia and Malaysia are likely to keep crude palm oil shipments duty free in January, in order to improve demand to support prices at the start of next year.

Initially, the price remained flat. Subsequently, there were gains in the early session due to ringgit weakening to a five year low.

This ensured that palm oil was easier to purchase overseas buyers due to its cheaper price, and this also matched evenly by losses seen in the later session due to falling crude oil prices to a near five and a half year low.

The price then fell, due to weakening crude oil markets and soy markets.

The price then climbed due to encouraging export data which improved optimism regarding the demand outlook.

The price then fell, due to tracking declines in competing vegetable oil markets. However the price then rose in the later session, recovering from earlier losses to end the day higher, due to expectations of reductions in production.

By the end of the week, the price rose due to a weakening ringgit and concerns over the reduction of output caused by the monsoon season in December. However, gains were limited and the price fell, due to tracking falling crude oil prices.

Technical analysis

According to weekly FCPO chart, the price tested middle Bollinger band 2,150, but was unable to break below.

According to the daily FCPO chart, the price increased initially, testing psychological level 2,200 and middle Bollinger band.

However, gains retreated to close flat.

The price continued to fall, targeting lower Bollinger band.

The price then increased, while continuing to range between lower and middle Bollinger band.

The price then fell in the early session.

However, the price managed to recuperate losses and climbed in the afternoon session, closing above middle Bollinger band, while unable to break psychological barriers 2,200, and closing below.

The price then initially climbed, breaking above psychological barrier 2,200 and testing resistance line 2,210.

However, early gains were lost in the afternoon session, as the price fell, closing below psychological level and middle Bollinger band.

In the coming week, the price has potential to range between 2,100 and 2,200, and therefore must be aware that until break either psychological barrier will continue to range.

Resistance lines will be placed at 2,210 and 2,250, while support lines will be positioned at 2,140 and 2,090, these will be observed in the coming week.

Major fundamental news this coming week

ITS and SGS report on December 15 (Monday).

Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my. Disclaimer:  This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.

Source : The Borneo Post