Down 0.6% at MYR2,143/tonne on 15/10/19, Palm Oil prices retreated off their August high of MYR2,262/tonne on mild profit-taking after the recent run-up from a low of MYR1,944/tonne. The price pullback is also in response to news that the Indian Government is considering restricting the import of palm oil and other goods from Malaysia following callous comments from latter’s Prime Minister Mahathir Mohamad on how Jammu and Kashmir have been invaded and occupied by India.
No official comment has been made by the Indian authorities with regard to import restrictions but traders are adopting a cautious role ahead of official direction from policy makers. India imports some 150,000 tonnes of CPO a month from Malaysia. Any official move to restrict imports may redirect orders to countries such as Indonesia, Argentina and Ukraine but change in Indian International trade policy is unlikely to trigger an all-out Trade War with Malaysia as it would be detrimental to both economies.
Meanwhile, the biodiesel mandates of B20 in Malaysia and B30 in Indonesia by 2020 is expected to drive demand and lend support to CPO prices.
CPO is currently trading within a downward-sloping band dating back to early August 2019. Strong resistance can be found at the upper boundary of the channel MYR2,260 while support can be found at MYR1,944. A convincing breakout from this resistance level, accompanied by rising volume traded, should be viewed as a bullish reversal with a longer-term target around MYR2,590.
