26/01/2016 (Borneo Post) - Malaysian palm oil futures climbed higher on Friday to 2,459, due to expectations of lower output and as traders covered their short positions ahead of a long holiday weekend.

Future Crude Palm Oil (FCPO) benchmark April 2016 contract settled at 2,459 on Friday, up 48 points or 1.9 per cent from 2,411 last Friday.

Trading volume decreased to 165,158 contracts from 189,562 contracts from last Monday to Thursday. Open interest based decreased to 836,085 contracts from 841,546 contracts from last Monday to Thursday. Cargo surveyor, Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during January 1-20 decreased 8.5 per cent to 666,816 tonnes compared with 728,421 tonnes during December 1-20.

Another cargo surveyor, Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during January 1-20 decreased 10.5 per cent to 666,288 tonnes compared with 744,563 tonnes during December 1-20.

Overall, demand strengthened from China, while demand weakened from the EU, Pakistan, India, and the US.

Spot ringgit strengthened on Friday to 4.2940, as underlying concerns over the country’s falling oil and gas revenues were offset by the central bank’s decision to add liquidity, lifting local stocks and bond prices.

Malaysia is still committed to its plan to raise its biodiesel mandate to 10 per cent despite low oil prices, a senior government official said on Tuesday.

Malaysia’s Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas said they were in the final stages of consultation with stakeholders on the B10 programme, which mandates a minimum 10 per cent of bio content in diesel, and will submit a cabinet paper on this by the end of February.

On Monday, the price rose, for a second consecutive day, touching the highest in more than two weeks, tracking an improved Chinese Dalian soybean oil performance and as physical prices for crude palm oil (CPO) remained firm.

On Tuesday, the price climbed while staying range-bound, as traders grew bullish on more pronounced forecasts of lower production.

On Wednesday, the price fell by more than 1 per cent, retracing further from a three-week high reached at the start of the week, after data showed a drop in exports this month. On Thursday, the price declined for a second consecutive day, touching the lowest in 4 days, tracking weak crude and competing vegetable oil prices.

On Friday, the price rose by more than 1 per cent, ending 2 successive days of decline, after touching a near one-week low in the previous session, supported by expectations of lower output and as traders covered their short positions ahead of a long holiday weekend.

Technical Analysis

According to the weekly FCPO chart, the price opened and closed above middle Bollinger band and psychological barrier of 2,400.

According to the daily FCPO chart, on Monday, the price opened above middle Bollinger band, and resistance level 2,450. An upside gap was formed from 2,410 to 2,470, which if able to be covered, could indicate potential to test psychological barrier 2,400.

By the later session, the previous gap was unable to be covered, while the price closed above middle Bollinger band and resistance level 2,450.

A doji candlestick was formed, which may indicate that there is insufficient buying momentum to break above psychological barrier 2,500 in the near term. On Tuesday, the price opened above middle Bollinger band and resistance level 2,450.

A gap was formed from 2,470-2,480, which if able to be covered, could indicate potential to test resistance level 2,450. By the later session, the previous gap was covered, while the price closed above middle Bollinger band and resistance level 2,450.

A dragon-fly doji candlestick was formed, which indicates that sellers initially pulled the price lower, however by market close, buyers were able to push the price back towards the opening price.

On Wednesday, the price opened above middle Bollinger band and resistance level 2,450. A downside gap was formed from 2,470-2,480, which if able to be covered, could indicate potential to test resistance level 2,450.

By the later session, the previous gap was unable to be covered, while the price tested middle Bollinger band and resistance level 2,450, closing above.

The price is attempting to cover the upside gap formed on Monday from 2,410 to 2,470, from the rollover activities.

On Thursday, the price opened above resistance level 2,450 and middle Bollinger band. By the later session, the price tested middle Bollinger band and resistance level 2,450, closing below.

The upside gap formed on Monday from 2,410-2,470 was able to be covered, which could indicate potential to test psychological barrier 2,400. On Friday, the price opened below middle Bollinger band and resistance level 2,450.

An upside gap was formed from 2,420-2,440, which if able to be covered, could indicate potential to test psychological barrier 2,400. By the later session, the previous gap was unable to be covered, while the price tested middle Bollinger band and resistance level 2,450, closing above. Next week, the price has potential to range between 2,370 and 2,500.

Resistance lines will be placed at 2,490 and 2,540, while support lines will be positioned at 2,410 and 2,370, these levels will be observed next week.

Major fundamental news this coming week

ITS and SGS report released on January 26 (Tuesday) Malaysian Public Holiday, Thaipusam, on January 25 (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.