Crude palm futures set to trade range-bound

KUALA LUMPUR – The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade in range-bound mode next week as the market lacks movement catalysts, a dealer said. 

Interband Group of Companies senior palm oil trader Jim Teh said the market projection is based on the quiet market and no major festivals happening in the coming weeks.

He said the futures contract is expected to trade between RM3,200 and RM3,300 per tonne. 

Palm oil trader David Ng also expects the CPO futures to trade range-bound but with a negative bias, given the prospect of higher production, which may increase the overall stock level in the country.

“We estimate the price to trade within a range of RM3,400 per tonne and RM3,650 per tonne,” he said.

Meanwhile, MIDF Research anticipates the CPO price to soften in the second half of the year as production is expected to recover due to better weather conditions, thus leading to higher stockpiles.

Higher soybean production would likely impact the CPO price negatively, noting that the US Agriculture Department (USDA) has increased its forecast for Brazilian soybean production by one million tonnes to 137 million tonnes, the research house said.

“High soybean stocks will eventually lead to higher supply of soybean oil (SBO). The CPO price is strongly correlated with SBO as both commodities are commonly used as each other’s substitute in the food manufacturing industry,” the firm said.

For the week just ended, the market closed mostly lower, tracking the weakness on soybean oil in  the Chicago Board of Trade and sentiment on weaker exports in the coming months.

On a weekly basis, the July 2021 contract gained RM109 to RM3,702 per tonne, August 2021 recovered RM98 to RM3,601 per tonne, September 2021 earned RM96 to RM3,520 per tonne and October 2021 firmed RM92 to RM3,475 per tonne

Weekly volume was reduced to 381,462 lots from 484,666 lots in the previous trading week, while open interest declined to 234,760 contracts versus 270,605 contracts previously.

The physical CPO price for July South advanced RM50 to RM3,750 per tonne. – Bernama, June 26, 2021