Crude palm oil futures (FCPO) on Bursa Malaysia Derivatives surged this week on expectation of better exports demand and lower palm oil stocks in May.
The benchmark FCPO August contract surged RM60 or 2.50 per cent to settle at RM2,457 per tonne on Friday from RM2,397 per tonne last Friday. The trading range for the week was from RM2,364 to RM2,471.
Total volume traded for the week amounted to 143,938 contracts, up 22,471 contracts from the previous week. The open interest as at Thursday decreased to 171,192 contracts from 174,134 contracts the previous Thursday.
Reuter’s poll revealed on Wednesday that the palm oil stocks may probably see a reduce by 7.6 per cent to 1.78 million tonnes in May based on the survey of five plantation companies. If this figure is realised, the palm oil stocks in Malaysia would have see a decline for the consecutive five months.
Meanwhile, the palm oil production is expected to rise two per cent to 1.39 million tonnes while the exports may likely drop 2.70 per cent to 1.41 million tonnes.
The exports demand from China are expected to remain sluggish while the shortfalls are expected to be covered by the rising demand from India and Pakistan ahead of the Muslim festival in August.
Some traders expected the export data for the first 10 days of June would improve as the demand from India and Pakistan seemed to be picking up lately.
Meanwhile, the unfavourable weather condition in US continues to disrupt the farmers’ plantation of corn and soybean.
The weather outlook of thunderstorms and rains next week may further delay the planting progress in US which was already behind the average progress for the last five years.
The latest crop progress released by US Department of Agriculture showed that soybean planting as at June 2 was 57 per cent complete versus 44 per cent the previous week, and was still below the five years average of 74 per cent complete.
According to Reuter’s poll, analysts forecasted the US soybean ending stocks to be at 268 million bushels, up from 265 million bushels in the last month’s supply and demand reports.
The economic data released in China was weaker, reflecting the local and overseas demand was softer in May.
The latest US job reports showed that US had created 175,000 jobs in May but the jobless rate increased to 7.6 per cent.
This was taken as a positive sign by the investors as they expected the Federal Reserve would not taper off their bond purchasing program so soon as the jobless rate has not reached their target yet.
Technical View
The benchmark August contract extended its gain in the uptrend channel. The prices reached the resistance level of the channel and had reached the target of the current uptrend.
The palm oil prices may be prone to form toppish formation at this current level. Support and resistance of the channel will always be closely monitored.
Resistance would be pegged at RM2,476 and RM2,515 while support was set at RM2,390 and RM2,335.
Major fundamental news this coming week
MPOB’s monthly supply-demand report on June 10, Malaysian export data for June 1 to 10 by ITS and SGS on June 10 and USDA’s monthly supply-demand report on June 12. 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
