MARKET DEVELOPMENT
CPO in for more correction
CPO in for more correction
11/6/07 (The Stars) - CRUDE palm oil (CPO) futures prices on Bursa Malaysia Derivatives experienced wild swings last week as prices soared in early trading to new historic highs. They then turned bearish following a wave of heavy selling linked to long-liquidation profit-taking and hedge-selling by producers.
Bullish rumours that Indonesia intended to raise export tax on palm oil and India was considering cutting duties on palm oil boosted values and lifted prices to new historic highs in mid-week.
On Wednesday, the spot-June futures hit a new historical high at RM2,956 a tonne and the most active August futures also made fresh life-of-contract high at RM2,764 a tonne.
It was all about the bears panicking in early sessions and the bulls desperate to bail out later in the very volatile trading sessions last week. Earlier bullish traders turned aggressive sellers when their expectations on Indonesia and India’s intended moves failed to materialise.
Instead, Indonesia on Wednesday raised its base export prices for palm oil products to bring them in line with international prices. Base export prices are used to determine the amount of tax paid by exporters.
Also, news on Thursday that Indonesia has delayed its plans to raise palm oil export tax and would only increase the tax from 3% to 6.5% if domestic CPO prices remained above 7,000 rupiah per kg by end-June triggered the massive sell-off.
In April, India reduced the palm oil import duty by 10% to 50% to dampen high international prices.
The spot-June futures plunged from their record high of RM2,956 to a low of RM2,715, down RM293 or 10.60% a tonne from its weekly peak. The August futures prices closed RM91 a tonne lower at RM2,471.
Trades for the week fluctuated widely from RM2,764 to RM2,471.
Volume for the week climbed to 84.157 from 72,239 contracts the week before. Open interests at Thursday's close stood at a record 98,846 contracts, equivalent to 2.47 million tonnes of CPO.
The weekly candlestick chart settled in a bearish setting. The big sell-off last week formed a large black candle. This engulfing bearish pattern is a negative development and signifies the immediate-term momentum may be shifting from bull to bear.
All the technical indicators suggest the downward momentum would expand this week.
Soyoil futures prices on the Chicago Board of Trade ended Friday sharply lower, down one cent a pound from previously.
The Malaysian Palm Oil Board’s May output, stocks and export figures and the cargo surveyor’s exports numbers for the first 10 days of May would be released today.
Traders are expecting little bullish surprise from these reports.
Bullish rumours that Indonesia intended to raise export tax on palm oil and India was considering cutting duties on palm oil boosted values and lifted prices to new historic highs in mid-week.
On Wednesday, the spot-June futures hit a new historical high at RM2,956 a tonne and the most active August futures also made fresh life-of-contract high at RM2,764 a tonne.
It was all about the bears panicking in early sessions and the bulls desperate to bail out later in the very volatile trading sessions last week. Earlier bullish traders turned aggressive sellers when their expectations on Indonesia and India’s intended moves failed to materialise.
Instead, Indonesia on Wednesday raised its base export prices for palm oil products to bring them in line with international prices. Base export prices are used to determine the amount of tax paid by exporters.
Also, news on Thursday that Indonesia has delayed its plans to raise palm oil export tax and would only increase the tax from 3% to 6.5% if domestic CPO prices remained above 7,000 rupiah per kg by end-June triggered the massive sell-off.
In April, India reduced the palm oil import duty by 10% to 50% to dampen high international prices.
The spot-June futures plunged from their record high of RM2,956 to a low of RM2,715, down RM293 or 10.60% a tonne from its weekly peak. The August futures prices closed RM91 a tonne lower at RM2,471.
Trades for the week fluctuated widely from RM2,764 to RM2,471.
Volume for the week climbed to 84.157 from 72,239 contracts the week before. Open interests at Thursday's close stood at a record 98,846 contracts, equivalent to 2.47 million tonnes of CPO.
The weekly candlestick chart settled in a bearish setting. The big sell-off last week formed a large black candle. This engulfing bearish pattern is a negative development and signifies the immediate-term momentum may be shifting from bull to bear.
All the technical indicators suggest the downward momentum would expand this week.
Soyoil futures prices on the Chicago Board of Trade ended Friday sharply lower, down one cent a pound from previously.
The Malaysian Palm Oil Board’s May output, stocks and export figures and the cargo surveyor’s exports numbers for the first 10 days of May would be released today.
Traders are expecting little bullish surprise from these reports.