ZLBT Chats

Wednesday, February 10, 2010

Crude Palm Oil / Soybean Oil / Variance

Crude Palm Oil Ends Higher For Sixth Day On Supply-Demand Outlook
Crude palm oil futures on Malaysia’s derivatives exchange rose for the sixth day Tuesday, amid hopes January palm oil output may have declined 13%-15% from a month earlier, trade participants said.

The benchmark April CPO contract on the Bursa Malaysia Derivatives ended up MYR11, or 0.4%, at MYR2,561 a metric ton, after rising to an intraday high of MYR2,570/ton. CPO futures last rose to this level on Jan. 12.

Palm oil inventories may have declined from December's level of 2.24 million tons to around 2.0 million tons, plantation company executives and trade participants said.

Most companies have reported a decline in output, with reductions mostly between 12% and 26%, according to preliminary data from an industry association.

"A likely rise in exports to around 400,000 tons for the first 10 days in February supported CPO futures," said a Kuala Lumpur-based trading executive.

Cargo surveyors put exports for the Jan. 1-10 period around 346,462-351,818 tons.

Cargo surveyors and the Malaysian Palm Oil Board are expected to issue export estimates Wednesday.

Palm oil prices "will likely hold near current levels" due to rising food demand from major vegetable oils buyers China and India, and the increasing use of biofuels, rating agency Fitch said in a report.

"Consumption in populous countries, such as China and India, is expected to continue to drive demand growth for crude palm oil, while further support could come from potentially higher biodiesel mandates following the upturn in oil prices," it said.

China's palm oil imports in February are likely to rise 1.5% to 355,787 tons from 350,636 tons in January, according to a forecast by China's Commerce Ministry.

In the cash market, palm olein for April/May/June traded at $777.50/ton and $780/ton, said a Singapore-based trader. Cash CPO for prompt shipment was offered MYR5 higher at MYR2,580/ton.

Open interest on the BMD was 76,079 lots Tuesday, down from 76,779 lots. One lot is equivalent to 25 tons. Some 15,505 lots of CPO were traded versus 15,199 lots Monday.

Soybean Oil Closes @38.38 >>> Up 0.43
March soybean oil was steady to slightly higher overnight as it extends Monday's breakout above the 20-day moving average crossing at 37.18. The mid-range close sets the stage for a steady to higher opening when the day session begins later this morning.

Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term.

If March extends Monday's rally, the reaction high crossing at 39.02 is the next upside target. Closes below the 10-day moving average crossing at 36.93 would temper the near-term friendly outlook.

First resistance is Monday's high crossing at 38.47.
Second resistance is the reaction high crossing at 39.02.

First support is the 20-day moving average crossing at 38.18. Second support is the 10-day moving average crossing at 36.93.

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