Asian palm oil prices seen mixed on Indonesia ban
Asian palm oil prices seen mixed on Indonesia ban
KUALA LUMPUR (Reuters): The Asian palm oil market is likely to be mixed this week, with Indonesian prices expected to fall as supply rises due to an export ban, regional traders said.
"Supply is beginning to improve because of the export ban, and this will keep prices under pressure," an Indonesian trader said. "But the decline will not be as sharp as last week's.
Indonesia last month banned the export of crude palm oil and palm olein between January and March, and followed it up with a ban on all crude palm oil products in a bid to boost domestic production and reduce the price of cooking oil, traders said.
The government announced on Thursday that the ban would be retained until March, after which palm oil exports would be subject to an export tax not exceeding 20 percent.
"With the government confirmation that the export ban will not be lifted until the end of March, we will see all production entering the local market," the Indonesian trader said. "I see the possibility of olein prices edging below the 2,000-rupiah level this week," the trader said.
Indonesian palm olein was quoted at 2,300 rupiah/kg in Jakarta, down from 3,400-3,600 rupiah a week ago.
However, regional traders said Indonesia's resolve to ban exports of palm oil products until end-March could fuel rallies on Malaysian and Singapore markets.
"I think the market looks very strong," one vegetable oil dealer in Singapore said, adding the ban by Indonesia will help keep prices on the positive side.
The Malaysian palm market also welcomed the Indonesian palm oil export ban news.
"This news is good for us. With the export ban in Indonesia, buyers will have to turn to us (Malaysia) for palm products," said a senior trader in Kuala Lumpur.
"This will help to draw down our stock level."
Last week, Malaysia's Palm Oil Registration and Licensing Authority (PORLA) announced a 15.17 percent fall in December stock to 962,490 tons from November's 1.13 million tons.
But several Malaysian traders said last week's technical correction to the recent bull-run will continue into this week in anticipation of a strong ringgit.
The ringgit hovered at around 4.2 to the U.S. dollar on Friday in Kuala Lumpur trading. It is likely to touch the 4.0 dollar level this week, commodity traders in Kuala Lumpur said.
"The palm market is so sensitive to currency movements. Any significant move in the dollar/ringgit will prompt speculators to take advantage of the ringgit to hedge," said the Malaysian trader. "People will just shrug off any fundamentals."