CPO futures to trend higher next week

KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is likely to trend higher next week underpinned by improving exports and weaker output.

Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varqa said CPO futures still have legs to climb higher as traders anticipated that heavy rains in Kalimantan, Indonesia would disrupt harvest and this would likely drive prices higher.

Cargo surveyor Intertek Testing Services reported that Malaysia's palm oil exports in the July 1-15 period fell to 831,155 tonnes from 914,120 tonnes in June 1-15 period, down 9.08 per cent. Exports for the July 1-10 period amounted to 448,516 tonnes against 545,360 tonnes in June 1-10, a decline of 17.76 per cent.

Sathia said the CPO market will focus on July 1-20 production estimate from the Malaysian Palm Oil Association (MPOA) next week for market direction.

Meanwhile, Interband Group of Companies Senior Palm Oil Trader Jim Teh said traders also expected increasing demand for CPO from China, Pakistan and India.

However, Teh said with the price at the higher end, the market could trigger some speculative play and profit-taking.

"The price movement next week is expected to confine between RM2,400 and RM2,520 per tonne,” he added.

For the week just ended, the CPO futures were traded higher mainly driven by the prospect of lower production this month due to stressed rubber trees and lower fertilisation rate, as well as weaker ringgit which makes the local commodity more attractive to traders.

On a Friday-to-Friday basis, the CPO futures contract for August 2020 rose RM138 to RM2,605 per tonne, September 2020 surged RM98 to RM2,554 per tonne, October 2020 added RM108 to RM2,520 per tonne, and November 2020 jumped RM116 to RM2,500 per tonne.

Weekly volume increased to 278,651 lots from 215,356 lots last Friday while open interest slid to 246,199 contracts from 249,900 contracts.

On the physical market, August South advanced RM226 to RM2,700 per tonne. - Bernama

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