Palm oil inventory rose 6.9% in Dec-18 to 3.22MT (highest in history), recording its 7th consecutive monthly increase as higher opening stock more than offset seasonally lower output and mildly higher exports and domestic disappearance. Nevertheless, stockpiles are likely to moderate in Jan-19 amid seasonally lower output, festive-driven demand (CNY in early-Feb) and India’s recent move to cut import duties on CPO and refined palm oil, which in turn bodes well for palm oil exports (palm oil products for 1-10 Jan surged 53% to 458k MT against 1-10 Dec). We see near term sideways consolidation before resuming its uptrend towards RM2200-2240 levels.

Near term consolidation to prevail before retest the formidable 200d SMA or RM2244 levels. We reiterate that after rallying from 52w low of RM1940 (27 Nov) to a high of RM2200 (19 Dec), FCPO is poised for a healthy pullback, with near term base building supports situated at 2151 (100h SMA), RM2139 (23.6% FR) and 2100 levels. Only a strong breakout above RM2188 (10 Jan high) will spur prices higher back towards RM2200 psychological barrier and RM2244 (200d SMA) zones.

Source: Hong Leong Investment Bank Research - 11 Jan 2019