Asian palm oil marts wary over riots

Asian palm oil marts wary over riots

KUALA LUMPUR (Reuters): Asian palm oil traders are expected
this week to keep a close watch on the turmoil in Indonesia,
traders said.

The outlook for the Indonesian market was uncertain amid
outbreaks of violence in Medan, a key commodity trading city in
North Sumatra, they said.

Several people have been reported killed in protests in Medan.
People in the East Java capital of Surabaya took to the streets
in protests on Sunday, calling for President Soeharto to step
down.

"We will still monitor the situation in Medan. We are in a
kind of unknown territory because things are scary," said a
trader in Jakarta.

"There is no (palm olein) price because there is no trade. You
can ask for 10,000 rupiah per kg, but what if nobody has the
olein," one trader in Medan said.

Another Medan-based trader said: "There are no more deliveries
from the plantations, which are located outside the city. Tension
is still high there as the security forces are now concentrated
mostly on the city center."

The riots were sparked by government increases in fuel and
transportation prices in line with a reform agreement with the
International Monetary Fund.

Traders in Indonesia said transport of crude palm oil was slow
due to fears that road tankers might be attacked.

There had been no more deliveries from Medan as the toll roads
leading to Belawan port, the main exit for olein, rubber and
coffee, was still closed by police to prevent riots spreading to
the area, Indonesian traders said.

Indonesia's palm olein, used as cooking oil, closed on Friday
at 4,000 rupiah/kg by some traders, up from 3,750 rupiah/kg on
Thursday.

Meanwhile, palm oil prices in Singapore and Malaysia are seen
firm on bullish sentiment.

"Sentiment is quite firm again. Some people have started to go
long," said one trader in Singapore. "If riots don't stop in
Indonesia, sentiment will be even more bullish."

The Indonesian factor, coupled with supportive fundamentals
and a weak ringgit against the U.S. dollar, pushed Malaysia's
benchmark, third month, July futures up by more than 200 ringgit
a ton last week. The contract closed on Friday at 2,498 ringgit a
ton.

"We can't predict the resistance level. The market is so
liquid. We do not know what is going to happen next in Indonesia
and with the currency," said a senior trader in Malaysia.

However, some traders felt that the third month contract could
test its record level again.

The contract hit a historical level of 2,530 ringgit in
January this year.

This week's sentiment should remain strong as a nearby supply
shortfall would prompt stocks-strapped refiners to cover their
positions, Malaysian traders said. "Cash prices are going to stay
firm," one trader said.

Traders attributed low Malaysia stocks to the smaller output
owing to a drought.

Malaysian private forecaster Ivan Wong on Friday estimated
end-April stocks at 595,000 tons against 623,989 tons at end-
March.

Another Malaysian trader added: "There is also a lot of
uncertainty in Indonesia and not much oil is coming out from
there. It's all because of the riots. So people may continue to
buy."