Late Friday, Crude Palm Oil prices were attempting to break resistance at MYR3,128 – MYR3,130, having reversed the recent pull-back on mild profit-taking. The charts do not portend a reversal in the upward trajectory which dates back to mid-2019 but instead suggest further upside in coming weeks or months.
Factors supporting Crude Palm Oil prices include supply side factors such as unfavorable weather conditions and lower output due to reduced usage of fertiliser last year which have impacted yields negatively while higher biofuel mandates in both Indonesia and Malaysia is expected to reduce inventory levels.
The seemingly retaliatory move by India to restrict imports of Palm Oil and Palm Olein from Malaysia as a result of Dr. Mahathir’s criticism that India “invaded and occupied Kashmir” has worked in favor of buoying CPO prices as India scrambles to source from the non-sanctioned Indonesian market to meet domestic demand.
Beyond overhead resistance at MYR3,120 – MYR3,130, CPO faces another hurdle at MYR3,202 (Dec 2016 peak). The onset of Chinese Lunar New Year may give this rise in price more legs in the immediate term near term but profit-taking may cap gains beyond this level. On the downside risk may be limited to around MYR3,000 psychological support and MYR2,900 (Aug 2012 peak).
