KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade rangebound next week with the possibility of profit-taking activities after the recent rally.
Palm oil trader David Ng sees prices trading between RM3,900 and RM4,080 per tonne.
He said the futures prices continue to linger near the psychological resistance level of RM4,000 per tonne as market sentiment continued to be supported by persistent concern over weak output and the potentially lower stock level.
Mumbai-based Sunvin Group commodity research head Anilkumar Bagani said that due to the lower production season, palm oil is likely to stay at a tighter spread or even at a premium over competing soy oil and sunflower oil, at least till the end of the first quarter of 2024.
The Malaysian Palm Oil Association's (MPOA) Jan 1-20 Malaysian palm oil production data showed a reduction of slightly under 16 per cent and UOB Kay Hian estimated output to decline from 10 per centto 14 per cent.
"Meanwhile, we estimate a 16 per cent decline," he told Bernama.
On the export front, Intertek Testing Services (ITS) data shows Jan 1-25 Malaysian palm oil exports were at 1.06 million tonnes, up by 0.64 per cent from the Dec 1-25 period.
"The market is now waiting for the South Peninsular Mills palm oil production data for Jan 1-20 and Jan 1-25, along with the Jan 1-25 Malaysian palm oil export estimates by AmSpec and by Societe Generale de Surveillance (SGS)," he added.
Anilkumar added that the Chinese palm oil inventories had gone down and the coverage for the months of January and February seemed to be not enough, which could lead to strong China vegetable oil purchases for the Spring Festival starting from Feb 9.
Previously, he also predicted an improved demand outlook ahead of the Ramadan and festive months.
He noted that Malaysian palm oil exports had been on a slightly higher trend from December 2023 and expectations of Indonesia's export duties and levies to rise by one bracket for the Feb 1-15 period is helping palm oil prices.
For the week just ended, CPO futures traded mostly higher in sync with the performance of the soybean oil and crude oil prices and were supported by increasing bets on a larger decline in Malaysian palm oil production.
The CPO futures revisited the RM4,000 level this week, a level last seen in November 2023.
On a weekly basis, the spot month February 2024 contract gained RM58 to RM4,020 a tonne, March 2024 rose RM73 to RM4,031 a tonne and April 2024 climbed RM82 to RM4,021 a tonne.
May 2024 increased RM77 to RM3,973 a tonne, June 2024 expanded by RM76 to RM3,909 a tonne and July 2024 added RM78 to RM3,845 a tonne.
The total weekly volume slid to 234,510 lots due to the holiday-shortened trading week from 378,955 lots in the preceding week while open interest soared to 280,857 contracts from 210,844 previously.
The physical CPO price for February South stood at RM4,050 per tonne, higher by RM90 from January's South of RM3,960 per tonne last week. -Bernama