Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives plunged this week due to bearish fundamental reports released during the week.
The benchmark FCPO March contract tumbled RM101 or 4.09 per cent to close at RM2,366 per tonne on Friday from RM2,467 per tonne last Friday. The trading range for the week was from RM2,332 to RM2,476.
Total volume traded for the week amounted to 233,652 contracts, up 88,390 contracts from the previous week.
The open interest as at Thursday increased to 173,776 contracts from 164,839 contracts the previous Thursday.
MPOB released its bearish monthly reports on Malaysian palm oil’s supply and demand for December 2012 on Thursday with palm oil stocks were continuously higher at 2.628 million tonnes, an increase of 2.41 per cent from the previous month and was far above the average estimation of Reuter’s poll at 2.5 million tonnes.
According to the report, the exports in December dropped slightly 0.70 per cent to 1.65 million tonnes while the palm oil production reduced 5.86 per cent to 1.78 million tonnes.
Although the fall in exports was less than the drop in production for December, the absolute figure for production was still higher than the exports, contributing to higher palm oil stocks.
The palm oil demand is seasonally weak during winter time as palm oil tends to crystallise in colder weather. On the other hand, the production was seen falling due to the effect of heavy rains during this time of the year.
Cargo surveyor ITS released the palm oil export figures for the period of January 1 to January 10 on Thursday at 373,462 tonnes, a plunge of 25.27 per cent while another surveyor SGS at 343,081 tonnes, a dive of 33.57 per cent from the same period last month.
The main reason of the weak exports data was due to low demand from top importing countries like China and European Union countries.
Both countries’ imports slumped 58 per cent and 67 per cent respectively during the first 10 days of January compared with the same period last month.
Most Chinese importers were abducting the wait and see attitude as to monitor the impact of the stringent quality on imported palm oil products by the Chinese government.
In addition, the effect of zero per cent export tax on crude palm oil by the Malaysian government has yet to boost any demand for the tropical oil.
The Malaysian government is expected to reveal its crude palm oil export tax for February next Tuesday.
Meanwhile, USDA released its monthly report on soybean supply and demand on Friday with US soybean production for 2012 was estimated at 3.015 billion bushels, up from 2.971 billion in the previous report.
Technical View
The benchmark March contract broke all the major supports this week especially piercing through the uptrend channel support and EMA 50 line easily on Monday.
The unsustainability to stand above EMA 50 support has pushed the market back to sideway trend in the medium term until further new development in the fundamental factors.
The benchmark contract will change from March to April month next Wednesday. Resistance was pegged at RM2,430 and RM2,524 while support was set at RM2,330 and RM2,280.
Major fundamental news this coming week
Malaysian export data for January 1 to January 15 by ITS and SGS on January 15.
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