Weak CPO Price Eroded by Ringgit Strengthening and Crude Oil Weakening

The stronger ringgit has led to the price of commodities traded in ringgit becoming relatively higher for overseas buyers, resulting in reduced demand.

See: 22 March CPO Prices Increase, Helped by a Weaker Ringgit

CPO prices this afternoon were also weighed down by declines in the price of crude oil. The fall in oil prices has acted as a negative sentiment, causing CPO prices to continue their downward trend. The fall in oil prices has in turn reduced demand for alternative fuels, such as those made from CPO.

Oil prices fell in early Asian trading on Wednesday after figures from an industry group showed U.S. stockpiles had risen more than expected.

The front-month contract in U.S. crude futures was down 36 cents at $41.09 a barrel by 0047 GMT.It struck a 2016 high of $41.90 in the previous session before closing at $41.45.

Brent crude was 25 cents lower at $41.54, reversing gains in the previous session when it finished at $41.79.

See: Asia Session Crude Oil Prices Fall, Sparked by Increased US Production

The most actively traded CPO contract on the Malaysian commodities exchange today experienced a decline in June 2016. The most actively traded contract experienced a decline of 31 ringgit and is currently trading at 2,681 ringgit per ton.

Vibiz Research Center analysts have estimated that there is a possibility that the price of CPO futures in the following trading period will decline, as the potential decline in the price of crude oil has triggered a sentiment of global satiety as well as a strengthening of the ringgit. Price movements could also be influenced by the supply and demand of the global market.

May 2016 CPO futures contracts on the Malaysian commodities exchange have the potential to test the support level of 2,630 ringgit and 2,580 ringgit. Meanwhile, in the event that prices recover, the resistance level that will be tested is 2,730 ringgit and 2,780 ringgit.