Asian palm oil market eyes Pakistan developments

Asian palm oil market eyes Pakistan developments

KUALA LUMPUR (Reuters): Asian palm oil traders are closely watching developments in Pakistan after the country carried out nuclear tests last week.

Weak technical factors could pressure prices this week, dealers said.

Pakistan's nuclear tests provoked economic sanctions by the U.S. and Japan, which led to the country putting curbs on foreign exchange transactions.

"Technically the market has been quite weak recently. The Pakistan news came in time to make things worse," said one trader in Singapore, referring to plunging Malaysian palm oil prices.

"The market was temporarily supported earlier, but the support was short-lived. The Pakistan news may trigger more selling this week," the trader said.

Traders said that a curb on foreign currency trading would mean that Pakistan would not easily be able to obtain U.S. dollars to pay for earlier shipments to which it was committed.

"More selling is likely to be seen as people are still worried about Pakistan and also technically, the market looks weak," a senior trader in Malaysia said.

Support for Malaysia's benchmark, third month August futures contract is seen at 2,000 ringgit per metric ton, traders said. The contract closed on Friday at 2,292 ringgit per ton.

The market is also waiting for export data for May and a crop report from private forecaster Ivan Wong.

Ebbing worry over Indonesia may also weaken sentiment, traders said.

"Prices in Indonesia have stabilized after the riots. People are less worried about transport and distribution there," the Singapore trader said.

"On a weekly basis, the market is looking bearish," he said. Indonesian traders said palm olein prices were expected to remain stable this week.

"Most traders are selling olein at Rp 3,750 per kg. Prices will stay at that level as long as supply is sufficient. We don't expect to see any change in the market sentiment (next week)," said one trader.

Producers and the government agreed last Tuesday that olein should reach Rp 3,500- Rp 4,000 per kg in traditional markets in order to stabilize prices, which had soared after recent riots.

Transport and distribution of cooking oil were disrupted by social unrest in Indonesia last month because traders feared for their safety. Prices rose as high as Rp 6,000- Rp 7,000 per kg.

Traders said the move was only temporary until prices were fully stabilized in Jakarta and its surrounding areas.