FCPO Related News (Tues, Feb 19)

Crude palm-oil futures on Malaysia’s derivatives exchange ended up Monday on expectations of rising exports this month ahead of higher export duties coming into effect in March. A rise in demand in February can reduce the world’s No. 2 producer’s stockpiles, market participants said.  The benchmark April contract on Bursa Malaysia Derivatives ended 1.3% higher at 2,539 ringgit a metric ton after moving in a MYR2,501-MYR2,551/ton range.

The Malaysian government said last week it will set CPO export tax at 4.5% next month after two consecutive months of no duty. This boosted crude shipments and helped to ease supplies. The Malaysian Palm Oil Board said end-January palm oil stockpiles eased from an all-time high of 2.63 million tons in December to 2.58 million tons. "We view this [CPO tax] as positive for Malaysian refiners and negative for producers," CIMB Investment Bank senior plantation analyst Ivy Ng said. "The higher export tax could provide Malaysian refiners some advantage in terms of cheaper feedstock costs by up to MYR103.80/ton resulting from lower CPO price," she adds. Ms. Ng also expects exporters to ship more CPO before the tax comes into effect Mar. 1.

Further falls in stocks could spark a rally in prices in the coming months, Jupiter Securities chief market strategist Benny Lee said adding that prices can rise to MYR2,800-MYR2,900/ton if inventories ease as much as 600,000 tons in two months. Open interest on the BMD was 167,866 lots versus 170,163 lots Friday. One lot is equivalent to 25 tons. A total of 46,985 lots of CPO were traded versus 28,733 lots Friday.           [Dow Jones Newswire]

Technicals show mixed signals for Malaysian palm oil as it is not clear how high the current rebound could go, said Reuters market analyst Wang Tao. While the higher export tax may hurt Malaysia's crude palm oil export demand, the local processing industry may benefit from a relatively cheaper feedstock, analysts said. "We are neutral on the news as it will be short-term negative for Malaysia crude palm oil demand but long-term positive for Malaysia processed palm oil demand," Alan Lim Seong Chun, research analyst with Malaysia's Kenanga Investment Bank, said in a note to clients.

Brent crude rose slightly toward $118 a barrel on Monday, underpinned by expectations of improving global growth despite some weak U.S. data dampening prices at the end of last week. Tensions in the Middle East also lent support. In competing vegetable oil markets, the most active September soybean oil contract on the Dalian Commodity Exchange inched down 1.2 percent in late Asian trade. Markets in China resumed trading on Monday after a week-long Lunar New Year break.          [Reuters]

Today’s Support and Resistance for benchmark May contract is located around 2,530 and 2,580 respectively.