FCPO Related News (Mon, Dec 24)

Crude palm oil futures on Malaysia’s derivatives exchange ended sharply higher Friday as investors covered short positions ahead of the weekend and before Christmas Day closing. The benchmark March contract on Bursa Malaysia Derivatives ended 3.8% higher at 2,408 ringgit a metric ton, close to the intraday high of MYR2,410/ton. BMD will trade Monday, close Tuesday, and reopen Wednesday.

Concern over China canceling U.S. soybean orders was brushed aside as traders pinned hope on a recovery for palm oil demand, a Kuala Lumpur-based trader said. The U.S. Department of Agriculture Thursday said China, the world’s largest soybean importer, canceled orders for 540,000 tons. It also on Tuesday said China had canceled orders for 300,000 tons.

Demand for the oilseed is slowing, but exports of palm oil–particularly to price sensitive consumers India and Pakistan–are likely to rise due to palm oil’s widening discount to soyoil, another Kuala Lumpur-based trader said. The palm oil-soyoil differential is usually around $150-$200/ton, but is presently more than $350/ton, he said. Weather-related supply risk also underpinned palm oil prices, market participants said.

Palm oil shipments could be delayed by rain and flooding in the coming days in some of Malaysia’s palm oil growing states, including parts of Sabah, which has the country’s largest area of oil palm plantations, a Kuala Lumpur-based trading executive said. The executive tipped prices to test MYR2,450/ton next week. But not all are optimistic about the outlook for palm oil prices, particularly in the long term.

Malaysian inventories peaked at a record 2.56 million tons as of the end of November, and are likely to stay above 2 million tons throughout the first quarter of 2013, which will limit the upside for prices, said Kenanga Research commodities analyst Alan Lim. World agricultural supply and demand estimates from the USDA and the near-term unlikelihood of an El Nino and are also bearish factors, said Mr. Lim. The USDA in a Dec. 11 report estimated 2012-13 global soyoil ending stocks as being 3.4% higher than its November estimate of 2.9 million tons. El Nino is a weather phenomenon associated with warmer temperatures and limited rain.

Open interest on the BMD was 186,040 lots versus 173,137 lots Thursday. One lot is equivalent to 25 tons. A total of 33,240 lots of CPO were traded versus 36,567 lots Thursday.           [Dow Jones Newswire]

Malaysian palm oil futures touched a more-than-three-week high on Friday, posting their first weekly gain in five weeks as traders sought to cover short positions amid optimism for a zero export tax on crude palm oil in early 2013 to cut stocks. Palm oil posted a 5.9 percent gain on the week, its best performance this year, after the edible oil suffered four straight weeks of losses on record high stocks. "There's a technical break above the resistance level at 2,381 ringgit per tonne, and prices should remain supported above the 2,370 ringgit level," said a dealer with a foreign commodities brokerage in Malaysia. "One factor could be the pre-weekend short cover."

At the close, the benchmark March contract on the Bursa Malaysia Derivatives Exchange was up 3.8 percent to settle at 2,409 ringgit ($788) per tonne, just off a high at 2,410 ringgit, a level last seen on Nov. 28. Total traded volumes stood at 33,240 lots of 25 tonnes each, higher than the usual 25,000 lots. Technical analysis showed palm oil is expected to test resistance at 2,381 ringgit per tonne and a bullish target at 2,419 ringgit has been established, Reuters market analyst Wang Tao said.

A small surprise increase in Malaysia's palm exports for the first 20 days of the month also injected cheer in the market, with cargo surveyor Societe Generale de Surveillance reporting a slight increase of 0.5 percent in shipments for the period from a month ago. A jump in crude palm oil exports during the period, which shows companies are pushing out exports ahead of the year-end expiry of their duty-free quota, could help ease record-high stocks in the No.2 palm producer.

Analysts, however, cautioned against an overly optimistic view on inventory levels, citing lower demand from the northern hemisphere, where the edible oil tends to solidify in winter. "Hence, despite the expected December month-on-month production decline of 12 percent, inventory should stay persistently high at above 2.5 million tonnes," Alan Lim Seong Chun, an analyst with Malaysia's Kenanga Investment Bank, said in a research note. "Looking ahead to first quarter 2013, we expect the inventory to decline only marginally and to stay above 2 million tonnes and limit the price upside to below 3,000 ringgit."

Brent crude fell below $110 a barrel on Friday after talks in the United States to avert a budget crisis stalled, reviving worries about demand in the world's biggest oil consumer. Palm oil prices were also supported by gains in competing vegetable oil markets. U.S. soyoil for January delivery  gained 1.8 percent in late Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.6 percent higher.          [Reuters]

Today’s Support and Resistance for benchmark March contract is located around 2,390 and 2,450 respectively.