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CPO futures forecast to trade with downside bias next week

05/06/2021 10:27 AM

By Nurul Jannah Kamaruddin

KUALA LUMPUR, June 5  -- The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is forecast to trade with a downside bias ahead of a slew of market-moving data to be released next week.

The Malaysian Palm Oil Board (MPOB) is expected to release production, stocks as well as export data for May that are set to influence the overall market performance.

End-month inventory is expected to be higher, according to Singapore-based Palm Oil Analytics owner and co-founder, Dr Sathia Varqa.

"Next week is a four-day trading week with blockbuster data to be released by MPOB, the Malaysian Palm Oil Association (MPOA) and United States Department of Agriculture as well as June 1-10 figures by cargo surveyors.

"In addition, the Indonesian government will make a decision on export levy," he told Bernama.

Palm oil trader David Ng projected the key psychological support to remain at the RM4,000 level next week.

For the week just ended, the market was mostly lower on the back of weaker soybean oil prices, amid worries over stocks position, rising COVID-19 cases and the total lockdown.

CPO futures were higher on Wednesday and Thursday before ending the week on a lower note as investors booked profits ahead of the long holiday weekend and due to the bearish soybean market after the commodity hit its 10-year high during the previous session.

In a note recently, CGS-CIMB said COVID-19 cases were indirectly impacting productivity at the estates due to the delay in allowing the return of 32,000 foreign workers.

In the first four months of 2021 alone, Malaysia’s CPO output fell six per cent year-on-year to 5.18 million tonnes due to producers’ inability to raise productivity due to worker shortages.

"As such, there are likely downside risks to our current CPO supply estimates for Malaysia of 19.4 million tonnes (up 1.3 per cent) this year," it added.

On a weekly basis, June 2021 fell RM71 to RM4,230 per tonne, but July 2021 rose RM41 to RM4,201 per tonne, August 2021 gained RM119 to RM4,129 per tonne and September 2021 improved RM170 to RM4,064 per tonne.

Weekly volume surged to 386,895 lots from 284,060 lots in the previous trading week, while open interest dropped to 230,652 contracts versus 243,856 contracts previously.

The physical CPO price for June South slipped RM110 to RM4,250 per tonne. 

The domestic market will be closed on Monday next week in conjunction with the official birthday of the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah.


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