Cautious trading seen for palm oil next week on worries over rising stockpile

  • Markets
  • Saturday, 08 Dec 2018

The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange was down 1.1 percent at 2,165 ringgit a tonne at the end of the trading day, its sharpest daily decline in a week. Trading volumes stood at 38,540 lots of 25 tonnes each at the close of trade.

KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to see cautious trading next week as market players continue to worry over the alarming rise in stockpile.

A trader said the traders were awaiting further clarity from the November stock data to be released on Monday.

"The lack of new market catalysts will continue to dampen market sentiment. We are really hoping for friendly data to support the price," he said.

However, a recent report by CIMB Equities Research showed that end-month stocks may hit a record high of above 3.06 million tonnes, while exports were estimated to drop 11.9 per cent month-on-month in November 2018.

Meanwhile, Maybank Kim Eng Research, in its note, said the market was unlikely to be much better in the fourth quarter of 2018 as CPO spot price trended below RM2,000 a tonne since early November.

"The high palm oil stockpile needs to be drawn down quickly to lift the CPO price. Better luck towards end of first quarter 2019 when industry output turns seasonally low," it added.

For the week just ended, CPO futures prices were traded mixed.

On a Friday-to-Friday basis, December 2018 went down RM79 to RM1,793 a tonne, January 2019 erased RM54 to RM1,916 a tonne, February 2019 fell RM42 to RM1,998 a tonne, and March 2019 reduced RM23 to RM2,084 a tonne.

Weekly turnover dropped to 204,825 lots from 227,037 lots last Friday, while open interest stood at 278,911 contracts from 272,485 contracts last week.

On the physical market, December South shed RM60 to RM1,800 a tonne.

The upward trend seen in the Malaysian rubber market during the week just ended is expected to continue next week.

Malaysian Glove Manufacturers Association (Margma) President Denis Low Jau Foo said although the rally would not be strong, there were sign of price recovery ahead of the seasonal monsoon.

Earlier hopes about the US-China trade war grinding to a halt has lost steam and any inching up of the rubber prices is more to cover for some stocks ahead of the rains," he told Bernama.

He said the market was also awaiting clues from the International Tripartite Rubber Council (ITRC) meeting in Putrajaya next week.

The ITRC comprises the three largest palm oil producers, namely Thailand, Malaysia and Indonesia.

A recent report said the group had invited Vietnam to join the discussion following its rising supply to the global rubber market.

"This may also have sent some signals that there will be intervention of sorts by the three governments," he added.

For the week just ended, rubber prices were traded mixed.

On a Friday-to-Friday basis, the Malaysian Rubber Board's noon price for tyre-grade SMR 20 added 3.5 sen to 513.5 sen a kg, while latex-in-bulk rose 10.5 sen to 377.0 sen a kg.

The 5 pm unofficial closing price for SMR 20 was unchanged at last Friday's 511.0 sen a kg, while latex-in-bulk was 10 sen higher at 377.5 sen a kg - Bernama

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