Currency and supply to dominate palm markets

Currency and supply to dominate palm markets

KUALA LUMPUR (Reuters): Southeast Asian palm oil markets are expected to take their cue from regional currencies this week, with tight supply seen supporting the Indonesian market, traders said.

Indonesian traders said crude palm oil was in short supply because of an export rush ahead of the December 1 implementation of quotas on exported palm oil.

"Players exported large amounts of crude palm oil in November to beat the December 1 start of the quotas," said an Indonesian trader. "Many players are now without much raw material."

Traders said the export limits were aimed at boosting domestic supply and keeping local prices under control ahead of the Christmas, New Year and Eid al-Fitr celebrations.

Some Singapore dealers said uncertainty over export supplies from Indonesia next year and the export-boosting fall of the rupiah and the Malaysian ringgit could shore up sentiment.

"There is talk in the market that companies which do not have export quotas are continuing to export," an Indonesian trader said.

Indonesian palm olein finished last week at 1,880-1,950 rupiah/kg in Jakarta.

Palm prices surged across the psychological level of 1,850 ringgit (February futures) level after the ringgit fell to a fresh record low of 3.8650 to the dollar last week, Malaysian traders said.

However, the ringgit's sharp rebound on Friday following Kuala Lumpur's announcement of a package of confidence-boosting economic measures pulled prices back down.

"Palm is following the ringgit's wild movements," said a trader in Kuala Lumpur.

He added that the ringgit's volatility was making it difficult to predict the support and resistance levels of palm oil contracts.

On Friday, Malaysia's benchmark, third-month February futures closed at 1,844 ringgit a ton. Some technical analysts said the February futures contract was well supported at 1,800 ringgit.