BMD CPO May Trade Sideways In 3Q 21 As Seasonality Chart Suggests

Mumbai (Commodities Control) –The crude palm oil prices have receded from their peaks in the Malaysian and Indian markets as well during the month in progress. Historically, June has been the worst performing month for CPO. The bearish tone is likely to persist further and some more losses in prices could be in seen in the latter half of this month. It also appears under pressure in near-term fundamentally after analyzing the global supply and demand scenario.

Further, production of palm oil usually remains higher during July to September. With higher production prices are historically seen under pressure in the third quarter of the calendar year. Therefore, prices of palm oil are expected to remain sideways to down in coming months as the chart below also exhibits.

However, the uptrend in crude oil prices is supportive for palm oil as its demand for biodiesel will increase.

Monthly Seasonality – Crude Palm Oil (BMD)

· The following chart depicts monthly seasonality for Crude Palm Oil (BMD) from 1999 to present.

· From a historical perspective, Crude Palm Oil typically exhibits strong performance in Q4 (Oct – Dec period), with October being the best performing month (average return of +3.96%).

· On the other hand, June has historically been the worst performing month (average return of -2.51%) followed by September (-1.67) and January (-1.61).

Keeping the seasonality standpoint in view that shows bearish mood in CPO BMD, the technical points may also be overviewed that suggests prices may retest the key uptrend support line near RM 3,500 as shown in the chart below:

Palm Complex – CPO (Aug ‘21) — Counter-trend Decline / Next Support at RM 3,500

· CPO futures (Aug ‘21) remain on a lower trajectory / trading below the 20-/50-day MAs.

· From a chart perspective, prices may retest the key uptrend support line near RM 3,500.

· Traders may also note that from a seasonality standpoint, the month of June typically exhibits weak performance with an average monthly return of -2.51% (for the period starting 1999 to present).

In Indian market, CPO prices are usually seen influenced by Malaysian market. Obviously, further trend in CPO at Multi Commodity Exchange (MCX) will depend on the movements in CPO BMD. The current month CPO futures are seen in lower trajectory on the MCX. If weakness persists, June contract will receive support at a level of Rs 1000 per 10kg and further at Rs 950 in near term.

Meanwhile, crude oil prices have surged sharply to the highest level after September 2018 on strong demand prospects. MCX crude oil prices are ruling above Rs 5,000 per barrel mark and are poised to see more upside in near term. Rallies in crude oil are always supportive for palm oil due to increased demand of vegetable oils for biodiesel.