Malaysian palm oil futures (FCPO) dropped to their lowest for the week on Friday as it stretched losses into its fifth straight session as weakness in competing soy markets fuelled worries of a shift in demand from the tropical oil.
The new benchmark FCPO December contract settled at RM2,562 per tonne on Friday which was down by 108 points from last Friday at RM2,670.
The trading range for the week was from RM2,558 to RM2,689.
Total volume traded for the week amounted to 148,348 contracts which decreased by 9,252 contracts compared to last Friday’s 157,600 contracts.
The open interest as of Thursday totalled 156,058 contracts from 153,905 contracts from previous Thursday, an increase of 2,153 contracts.
Cargo surveyor Intertek Testing Services (ITS) reported that exports of Malaysian palm oil products from December 1 to 10 fell 19.85 per cent to 378,579 tonnes from 472,321 tonnes shipped during November 1 to 10.
Cargo surveyor Societe Generale de Surveillance (SGS) said on Tuesday that exports of Malaysian palm oil products for December 1 to 10 fell 26.06 per cent to 366,898 tonnes from 496,237 tonnes shipped during November 1 to 10.
According to last Tuesday’s Malaysian Palm Oil Board (MPOB) report, production fell 5.64 per cent to 1,861,114 tonnes compared to October 2013’s production at 1,972,278 tonnes.
Meanwhile, stocks increased 7.15 per cent to 1,977,895 tonnes compared to October 2013’s stock level at 1,845,936 tonnes.
Exports fell 8.65 per cent to 1,520,712 tonnes compared to October 2013’s export level at 1,664,743 tonnes.
US soybean futures dropped on speculations that China might start to cancel some US cargoes which might dampen soy export.
Moreover, an expected bumper South American crop fuelled concerns that global oilseed supply might overwhelm demand next year.
Meanwhile, weak demand for palm oil especially towards the year-end as palm solidifies in winter had pressured palm prices to post a weekly drop of 4.1 per cent which was the first in five weeks.
However, prospects of smaller supplies from Malaysia after monsoon floods in several palm-growing areas dented harvesting in the world’s No.2 producer have helped keep a floor under prices.
Ringgit weakened throughout the week to the highest at 3.2380 as concerns over the fact that the Federal Reserves might start its tapering programme as early as next January 2014.
Normally, a weaker ringgit would increase demand from foreign buyers as they have to pay lesser to purchase palm oil.
From the chart, price broke and closed below the 2,600 level for the week as it failed to break above the resistance line we drew last week.
Moreover, price broke the below the sideway range support level at 2,602 and 2,605 level which indicated weakness in the current uptrend.
Since price broke below the sideway range which we drew in the chart, price may fall even more to correct itself from the uptrend which began few months ago.
For the coming week we pegged our important support levels at 2,545, 2,506 and 2,485.
Meanwhile, for our resistance levels, we pegged important ones at 2,610, 2,630, and 2,690.
Major fundamental news this coming week
ITS & SGS Export reports – December 15 (Tuesday, December 16)
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Source : The Borneo Post