World vegetable oil futures rose on Monday following positive news about the development of a coronavirus vaccine. However, soybean oil prices were unable to hold overnight gains and settled only modestly higher. Palm oil prices did settle near the high of the day, driving the spread between the January soybean oil and palm oil contracts just below parity (palm oil slightly more valuable than soybean oil). Despite the decline in the spread, it still settled just above the life-of-contracts low set on October 29 at -39 basis points (palm oil contract about 1/3 cent per pound more valuable than soybean oil).

Energy prices also rallied sharply on the vaccine news, with the benchmark West Texas Intermediate (WTI) contract gaining more than 10 percent in early U.S. trading. However, selling after the U.S. open in energy futures and equity markets left the December contract up about 7 1/4 percent and just below the psychologically critical $40 per barrel level. Selling above the 50-day and 200-day moving averages, which are both just below the $40 level, limited the gains.

Soybean oil futures gained about 1/2 percent (December contract +14 basis points per pound) but settled nearly two percent below the day’s high. Selling at the critical 36-cent level limited overnight gains and pushed the benchmark contract to end the day just above the upper Bollinger band. Monday was the third consecutive day the contract has settled above that level, indicating the bullish fundamental backdrop. However, it will probably be tough for prices to rally in the short term until the upper Bollinger band’s slope steepens and raises the critical technical indicator above the benchmark contract’s level. In the short term, for the benchmark contract, Friday’s high of 35.79 may provide limited resistance while resistance at the 36-cent level looks more robust. The Jacobsen expects support at the 35-cent level, which is just above the five-day exponential moving average (34.96 cents as of Monday’s close).

The benchmark palm oil contract rose nearly 1 1/2 percent (January contract +46 ringgit per tonne), but the deferred contracts’ gains were smaller (August 2021 contract +14 ringgit). Still, the rally left the benchmark contract back above the 3,200-ringgit level ahead of critical fundamental data from the Malaysian Palm Oil Board (MPOB). Overnight increases in crude oil prices, which were modest compared with the rally following the vaccine announcement, helped support prices. Prices were also supported by buying ahead of the MPOB’s monthly supply and demand estimates. The MPOB will release its report on Tuesday, and traders expect the data to reflect a substantial decline in month-ending inventories from the three-year low published last month. Analysts expect the MPOB to report production fell by more than five percent, while exports rose more than five percent from September, contributing to the decline in stocks. The benchmark contract’s resistance, in the short term, is likely at the upper Bollinger band (3,236 ringgit as of Monday’s close) and Friday’s high of 3.262 ringgit. The 2012 high, just above 3,600 ringgit, will likely provide more robust resistance if the MPOB data is more bullish than analysts’ pre-report expectations. The Jacobsen expects short-term support at the five-day exponential moving average (3,161 ringgit as of Monday’s close) and the 3,100 ringgit level. The second target provided substantial resistance in late October and mid-September and is a logical place for short-term profit-taking for short positions. If the MPOB report is substantially more bearish than anticipated, the continuous most active contract’s 50-day moving average just above 2,900 ringgit is likely to provide more robust support.