BMD Crude Palm Oil Futures Overviews

CPO down on higher inventories & lower demands

CRUDE palm oil futures on Bursa Malaysia Derivaties remained soft as the tightening of China’s monetary policy raised demand concerns, said dealers.

The market was under pressure initially on follow-through selling over fears that China’s move to tighten liquidity could hit demand for the tropical oil and on talk of higher palm oil stocks in December.
“Fundamentals are getting weaker because demand is poor. We need to monitor closely China’s imports. If they are still buying that will give some kind of support,” said a trader at a Kuala Lumpur-based brokerage.

Although losses were limited, players remained cautious, ahead of the release of production, export and stock data by the Malaysian Palm Oil Board on Monday.
Traders are divided on the data, with some expecting a possible increase in stocks, a bearish factor since stocks normally inversely correlate to prices of the tropical oil.
“Everybody is expecting something on Monday. I think stocks will be marginally higher,” the Kuala Lumpur-based brokerage trader said.

Another trader at a commodities brokerage in Kuala Lumpur said he believed the market has discounted December stocks and expected a decline in stocks from January onwards on lower output.

Interband senior trader Jim Teh said it was better for the market to enter a correction phase as prices have been riding high in the past few weeks.

January 2010 fell RM10 to RM2,570 per tonne, February 2010 dropped RM18 to RM2,592 per tonne, March 2010 slipped RM4 to RM2,626 per tonne and April 2010 shed RM5 to RM2,636 per tonne.

Turnover rose to 20,15 lots from 17,032 lots yesterday and open interest improved marginally to 80,208 contracts from 78,741 contracts on Thursday.