FCPO Related News (Wed, Mar 6)

Crude palm oil futures on Malaysia’s derivatives exchange fell Tuesday, as investors booked profits after Monday’s 1.9% gain.  The benchmark May contract at Bursa Malaysia Derivatives ended 0.6% lower at 2,399 ringgit a metric ton after moving in the tight range of MYR2,389/ton-MYR2,428/ton. Trading volumes were thin as investors kept to the sidelines ahead of Wednesday, when vegetable oil analysts Dorab Mistry and James Fry are expected to give their price outlook forecasts at a palm and laurics oil conference in Kuala Lumpur that kicked off this week, market participants said.

Traders are also keeping an eye on Malaysia’s palm oil production, inventories and exports data for February from industry regulator Malaysian Palm Oil Board as well as March 1-10 palm oil shipments data from cargo surveyors Intertek Agri Services and SGS (Malaysia) Bhd. due next week, they said. Stockpiles in Malaysia have risen to record levels in the past year as the weak economic outlook dampened demand for the tropical oil. Inventories in Malaysia, the world’s second largest palm oil producer, rose to an all-time high of 2.63 million tons in January. "Malaysia and Indonesia may need to find [new markets] for palm oil in order to take up the slack caused by increased CPO supply and lower biodiesel usage," Singapore-based Chris de Lavigne, the global vice president of consulting in industrial practice at Frost & Sullivan, said at an industry conference. "Until then, prices could see a mini slump in 2013."

Still, port closings in the state of Sabah–Malaysia’s biggest palm oil growing region–caused by a standoff between security forces and armed Filipino followers of a Muslim clan leader, will likely support palm oil prices, trading executives said. "The palm oil ports of Sahabat, Tawau and Kunak have shut down after the clashes [in Sabah’s coastal town of Lahad Datu]," a shipping executive at a Kuala Lumpur-based surveyor firm said. "Prolonged port closures will leave exporters with little choice but to divert their shipments to other ports, delaying deliveries to consumers." In addition to port closures, some of the refineries are also temporarily shutting down operations until the violence ebbs while others are evacuating plantation workers amid the clashes, market participants said. This could curb production in the interim, limiting supplies and supporting prices, they added.

Open interest on the BMD was 165,744 lots versus 162,542 lots Monday. One lot equals 25 tons. A total of 19,877 lots of CPO were traded versus 36,692 lots Monday. Chicago Board of Trade soybean futures rose to their highest level in nearly four months on Tuesday as holdups in getting recently harvested South American crops to market buoyed demand for U.S. supplies, traders said. Brent crude broke a five-day losing streak on Tuesday, rising by more than 1 per cent toward $112 a barrel on optimism over Chinese oil demand, record-high U.S. equities and North Sea supply disruptions.   

[Dow Jones Newswire]

Technicals showed Malaysian palm oil is expected to either hover around a resistance level of 2,418 ringgit per tonne or rebound to 2,450 ringgit, said Reuters market analyst Wang Tao.

Palm oil refineries with a combined capacity of 1.8 million tonnes plan to halt operations if  a Malaysian military attack on an armed Filipino group on Borneo island drags on, refinery officials told Reuters on Tuesday. Sabah, part of Borneo island, is Malaysia’s top oil palm growing region, accounting for a quarter of national production. Much of the palm oil from Sabah is shipped to China – the world’s second-largest consumer of edible oils. The development was not impacting prices significantly so far, traders and analysts said. “If the turmoil drags on for weeks and months, it could have a more severe impact on production,” CIMB Investment Bank said in a note. “The security fears may also affect the operations of ports located near where the clashes are taking place”

In other markets, Brent crude futures rose towards $111 per barrel on Tuesday, bucking a five-day losing streak on bargain buying after China pledged to keep its economy growing at 7.5 percent. In competing vegetable oil markets, U.S soyoil for May delivery edged down 0.1 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodity Exchange inched up 0.2 percent.           

[Reuters]

Today’s Support and Resistance for benchmark May contract is located around 2,382 and 2,421 respectively.