Indian demand lifts Malaysian palm oil

Indian demand lifts Malaysian palm oil

KUALA LUMPUR (Reuters): Malaysian palm oil prices will remain firm in the near term on the back of rising demand, particularly from major importer India, traders said on Thursday.

But an expected increase in domestic stocks would limit the market's upside in the longer term, they said.

Local palm oil prices rose sharply in recent days on supportive export data and short-covering on the physical market, but pulled back on Thursday on profit-taking.

Malaysia's benchmark third-month (July) crude palm oil futures contract fell 18 ringgit to 1,660 ringgit (US$437) a ton by midday on Thursday.

"The market still has underlying strength and should be able to breach the 1,700 ringgit level," said a trader with a palm oil refinery.

But there would be strong resistance at around 1,750 ringgit a ton, he said.

Traders said they expected palm oil demand from India to remain strong in coming months.

"We estimate that India would import up to 250,000 tons of palm oil this month from Malaysia and Indonesia," said another trader.

India took 134,235 tons of Malaysian palm oil in the first 20 days of April compared with 57,465 tons in the same period in March, cargo surveyor Societe Generale de Surveillance (SGS) figures showed.

SGS on Tuesday estimated Malaysia's palm oil exports for April 1-20 at 492,768 tons compared with 461,034 tons in March 1-20.

Traders said some Indonesian exporters were actively buying Malaysian palm olein for nearby shipment to cover sales to India.

"One major exporter (in Indonesia) is said to be short because of supply tightness there. Moreover, it also makes sense to buy here as our palm olein is cheaper," the second trader said.

Malaysian palm olein price was currently about $30 a ton cheaper than Indonesia's, traders said.

They said palm olein's premium over soybean oil was unlikely to deter Indian buying.

Palm olein is currently priced $80 to $90 above crude soybean oil, and traders expected the premium to be maintained.

Traders said palm oil prices could come under pressure once demand slowed and as Malaysian production gradually picked up.

Private crop forecaster Ivan Wong projected Malaysian palm oil stocks at 775,000 tons by the end of April and 900,000 tons by end-June. Stocks stood at 716,328 tons at the end of March.

Wong forecast output would rise 11 to 12 percent in April from March's 703,322 tons.