CPO futures end higher for third consecutive day in line with CBOT
07/02/2024 (The Edge Malaysia), Kuala Lumpur - Crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives ended higher for the third consecutive day on Wednesday in line with the Chicago Board of Trade (CBOT) soybean oil market gains.
Palm oil trader David Ng said persistent concerns over lower output and potentially lower stock levels in the country also lifted market sentiments.
“We see support at RM3,750 a tonne and resistance at RM3,950 a tonne,” he said.
Meanwhile, Mumbai-based Sunvin Group commodity research head Anilkumar Bagani said CPO futures closed higher following a stronger CBOT soybean oil futures overnight and bullish Malaysian Palm Oil Association (MPOA) data, showing Malaysian palm oil production down by 11% in January 2024.
“However, a lack of follow-up buying in Bursa Malaysia Derivatives for the last few sessions is now resulting into a cautious approach,” he said.
Anilkumar said the low production and lower export scenario is now mostly priced in and the market is waiting for any fresh cues for a decisive trended momentum.
He said the nearby palm oil prices at the origins (Malaysia and Indonesia) are firmer, owing to the expectations of return of demand for vegetable oils from China as its oilseed crush has slowed down.
“Then the winter is also fading at key destination markets, such as China and the Indian subcontinent. Additionally, the Ramadan festival in early March would be a trigger point for demand,” he added.
According to Anilkumar, China is not much covered for February and March and it may try to cover vegetable oils for the upcoming spring festival.
“But the problem for palm oil is its tight spread over the soft oils, especially against the Black Sea sunflower oil and unless a significant recovery is seen in sunflower oil prices, the palm oil higher range is unlikely to be sustained,” he said.
MPOA estimated the January 2024 Malaysian palm oil production was down by 11.18% from December 2023.
“The production numbers are in line with the UOB Kay Hian estimates of -7% to -11%. The lower production will result in a drop in Malaysian palm oil end-January stocks,” he said.
At the close, spot month February 2024 contract added RM67 to RM3,930 a tonne, March 2024 rose RM46 to RM3,928 a tonne, April 2024 was RM34 firmer at RM3,877 a tonne, May 2024 put on RM20 to RM3,807 a tonne, June 2024 edged up RM12 to RM3,743 a tonne and July 2024 was RM9 better at RM3,697 a tonne.
Total volume improved to 68,735 lots from 64,570 on Tuesday and open interest went up to 213,967 contracts from 212,608 contracts previously.
The physical CPO price for February South increased by RM30 to RM3,950 per tonne.