23/03/2015 (Borneo Post) - Malaysian palm oil futures edged lower on Friday to 2,155, due to weak export data, however losses were limited as the weakening ringgit supported the price.

Future Crude Palm Oil (FCPO) benchmark June 2015 contract settled at 2,155 on Friday, down 92 points or 4.3 per cent from 2,247 last Friday.

Trading volume increased to 216,269 contracts from 197,518 contracts from last Monday to Thursday.

Open interest based on increased to 799,438 contracts from 757,202 contracts from last Monday to Thursday.

Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during March 1 to 15 decreased 3.4 per cent to 491,727 tonnes compared with 508,955 tonnes during February 1 to 15.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during March 1 to 20 decreased 5.5 per cent to 640,254 tonnes compared with 677,172 tonnes during February 1 to 20.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during March 1 to 15 decreased 5.2 per cent to 484,453 tonnes compared with 510,832 tonnes during February 1 to 15.

SGS also reported that Malaysia’s palm oil exports during March 1 to 20 decreased 7.1 per cent to 652,837 tonnes compared with 702,707 tonnes during February 1 to 20.

Overall, demand rose from the EU and India, while demand weakened for the US and China. Spot ringgit weakened on Friday to 3.729, after hitting a six year low, due to the data showing February inflation was the weakest in more than five years.

Malaysian government raised its palm oil export tax from zero to 4.5 per cent for April, ending a duty free policy held since September.

According to the Indonesian Palm Oil Association, exports fell for a fourth consecutive month, the longest decline in seven years, after demand from China slowed.

Indonesian crude palm oil output in February stabilised near January levels, although production is seen picking up in the coming months as the monsoons recede, a survey of leading industry officials showed. Indonesia produced 2.049 million tonnes crude palm oil in February, versus 2.056 million tonnes in January.

Indonesia is considering reducing the threshold regarding its monthly export tax for crude palm oil, in order to help processing industries damaged from low prices.

On Monday, the price fell to their lowest in six weeks, due to a decision to impose export taxes next month which fuelled worries that price-sensitive buyers would switch to rival edible oils.

On Tuesday, the price continued to decline, due to concerns over weak demand, coupled with doubts over Indonesian’s ambitious bio-diesel mandate weighed on prices.

On Wednesday, the price initially fell, as the price was weighed down by weak soy and crude prices which raised concerns over demand. However by the later session the price rose, rebounded after reaching a seven week low, due to a technical buying.

On Thursday, the price rose, due to a dollar induced rally, which suffered its biggest one day fall in six years, in overseas vegetable oil markets supporting the price. However gains were limited, due to weak global demand for the tropical oil, coupled with plentiful supplies.

On Friday, the price fell, due to disappointing export data. However, losses were limited as the ringgit weakened.

Technical analysis

According to weekly FCPO chart, the price initially opened below middle Bollinger band, after testing the middle Bollinger band during the previous week. The price fell, testing the lower Bollinger band, and closing above.

According to the daily FCPO chart, on Monday, the price initially fell, testing the support line at 2,210, the psychological barrier at 2,200, and the bottom Bollinger band, while entering oversold territory. By the later session the price managed to recover some earlier losses, closing above bottom Bollinger band.

On Tuesday, the price initially opened above the psychological barrier 2,200, and tested support line 2,210. The price then fell, closing below bottom Bollinger band, and the support line 2,150, while remaining in the oversold region.

On Wednesday, the price initially fell, however by the later session the price rose, recovering earlier losses, closing higher, while testing the support line at 2,150 and the bottom Bollinger band, closing above.

On Thursday, the price opened above the support line at 2,210. However, the price then fell, testing the psychological barrier at 2,200, as earlier gains were eradicated. By the later session, the price managed to recover, closing above the psychological barrier at 2,200. On Friday, the price opened below the support line at 2,210. The price then dropped, closing below the psychological barrier at 2,200.

The price has the potential to range between 2,250 and 2,150. Resistance lines will be placed at 2,210 and 2,260, while support lines will be positioned at 2,110 and 2,050, these levels will be observed in the coming week.

Major fundamental news this coming week

ITS and SGS report on March 25 (Wednesday).

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.