KL palm oil climbs on Indian shortage

KL palm oil climbs on Indian shortage

KUALA LUMPUR (Reuters): Malaysia's crude palm oil futures touched the 1,085 ringgit major resistance level on Thursday on talk that India is facing an edible oil shortage and may cut palm oil import duties, traders said.

In Indonesia, the world's second largest palm oil producer after Malaysia, such talk aroused demand from European buyers who believed they needed to stock up before India, the world's largest edible oil importer, came to the market.

At the close, the benchmark November futures contract ended up 14 ringgit at 1,075 ringgit ($282.89) a ton after trading as high as 1,085 ringgit. Volume was 1,834 lots.

"We've got more demand from European buyers because of the Indian talk," said one trader in Jakarta.

"We heard that one edible oil importer in south India is facing a shortage in oil and is ready to buy RBD palm olein at high prices. But I don't hear more details," he added.

But some traders said a number of major importers in India were intentionally holding back palm oil stocks at local ports to stir up speculation the country was facing a shortage of oil and may cut palm oil import duties.

"These guys believe that India will reduce the base prices and import duties in the first week of September. If that happens, those importers can take out that oil from the tanks and pay less duties," said one trader in Kuala Lumpur.

"Not only are they holding their stocks at customs bonded tanks, they are also buying oil at the domestic market just to create fear there is a shortage," he added.

In February, India imposed its heaviest-ever duty of 75 percent on crude palm oil and 85 percent on refined palm oil.

In August, India fixed the base import price of crude palm olein at $357 a ton. It means any importer will have to pay duty assessed on an import price of $357 a ton for the oil no matter what its purchase price.

India had earlier fixed the base import price of crude palm oil at $337 a ton and RBD palm olein at $372 a ton.

Also last month, talk circulated in the Malaysian market that some local refiners had shifted their palm oil to joint ventures in Singapore, India and China due to swelling stocks and a slowdown in demand.

Ot the physical side, September crude palm oil for southern and central regions were offered at 1,080 ringgit a ton against bids at 1,075. There were trades at 1,075 to 1,082.50 for both sides.

Among refined products, September RBD palm oil was offered at $297.50 a ton, October $300 and November/December at $302.50.

Offers for September RBD olein were at $312.50, October at $315 and November/December at $317.50.

September/October RBD palm stearin was offered at $255 a ton and September/October palm acid distillate was offered at $205.