CPO prices likely to stay weak

CPO slid last week on reports that a smaller-than-expected decline in stockpile (go here and here). From the chart, I expect CPO prices to test the support from the long-term downtrend line, R-R1 which coincides with the support from the medium-term uptrend line, S2-S2, at RM2400. A rebound from this support level is expected, though the rebound may be muted (probably falling short of the psychological RM2500 level). A break below RM2400 level (whether on first test or subsequent test) would send CPO prices to the recent low of RM2300. We will have to wait & see whether CPO prices can find support at this level; thus, forming a base for this commodity.

Despite the seasonally lower output, reduction in export duties for CPO and proposed Biodiesel 10% blend in 2014, CPO prices are still adrift. This is a sign that the supply of CPO is more than its demand and the market forces at work seeks to find an equilibrium at a lower clearing price. I expect this weak prices for CPO to persist for a while.


Chart: CPO's weekly price as at Feb 15, 2013 (Source: iFSmarketcenter.com)