KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to continue its downtrend next week due to profit taking amid concerns over higher production.
Interband Group of Companies senior palm oil trader Jim Teh said the months of September and October were usually a good period for production; hence this would weigh on sentiment.
He said demand was expected to be weaker, especially from overseas markets, on the back of the increase in COVID-19 cases.
"CPO prices are likely to hover between RM2,700 and RM2,800 per tonne next week,” he told Bernama.
Another dealer said demand from India ahead of the Deepavali festival would provide support for the local market next week.
On a Friday-to-Friday basis, the spot month November 2020 increased RM18 to RM2,985 per tonne, December 2020 gained RM10 to RM2,921 per tonne, and January 2021 added RM5 to RM2,870 per tonne.
Meanwhile, October 2020 ended at RM3,049 per tonne on Thursday, and newly-introduced contract month February 2020 ended at RM2,866 per tonne on Friday.
Weekly volume surged to 303,773 lots from 241,460 lots in the previous week, while open interest narrowed to 254,105 contracts from 258,490 contracts.
The local market started the week just-ended with a strong momentum, largely influenced by the positive September data by the Malaysian Palm Oil Board that showed exports of palm oil increasing by 1.88 per cent to 161 million tonnes from 1.58 million tonnes in August.
The stronger soya bean oil prices in China’s Dalian Commodity Exchange also helped to support the CPO price.
On Tuesday, Foreign Minister Datuk Seri Hishammuddin Tun Hussein announced that China expressed its commitment to purchase 1.7 million tonnes of palm oil from Malaysia until 2023.
Both countries also looked at opportunities in engaging trilateral cooperation using Malaysian palm oil and palm oil-based products to address food security in third countries, he said.
According to the Malaysian Palm Oil Council, Malaysia’s palm oil exports to China increased by 438,747 metric tonnes, or 31.1 per cent, to 1,848,433 metric tonnes for the January-August 2020 period.
Momentum in the market became subdued starting Wednesday on supply concerns as La Nina weather pattern, which brings heavy rainfall, could disrupt palm oil production.
Bargain hunting, however, emerged on Friday to support the market against further losses. - Bernama
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