Oil traders fear further RI action

Oil traders fear further RI action

LONDON (Reuters): Prices for coconut oil soared in Europe late on Wednesday as traders rushed to cover their requirements ahead of a possible ban of exports by Indonesia.

But other commodities showed relative stability after their downturn in the first few trading sessions of 1998.

Trade sources in Europe said that major producer Indonesia will shortly announce it is to widen its existing ban on exports of oilseed products used in cooking oil and soap manufacture.

In December Indonesia announced a ban on exports of palm oil and palm olein for the first quarter of 1998 in order to protect its home market when seasonal demand soars.

But according to trade sources in Europe attempts had been made to export palm oil using documents declaring it was another (unbanned product) and this has prompted further government action.

"It appears that four ships were ordered to pump back oil they were loading after the ban came into effect at midnight on Jan 1.

The documents said it was palm stearin they were pumping but when it was checked it turned out to be crude palm oil," a European palm oil trader said.

"There has been far more palm stearin shipped in recent days than could possibly have been produced, and the coconutoil numbers also look very high....its hardly surprising the government appears to be taking some action," another trader said.

On the European oils market coconutoil for February/March delivery traded up to $575 a ton, up around $15 while more forward deliveries broke above the $600 a ton level.

But many traders reckoned that replacement supplies would not be difficult to locate, citing Philippines coconut oil and Malaysian palm stearin.

In the base metals complex on the London Metal Exchange (LME), where sizeable losses had been recorded on Monday and Tuesday, conditions were a lot calmer on Wednesday with some metals recording small gains, or at least much reduced losses.

But traders were not convinced the worst was over.

"It's just a short-covering rally, that is all it is. Nothing goes down in a straight line," one trader said.

Fundamentals generally remained bearish, with depressed currency and equity markets in the Far East underlining negative expectations for demand in Asia, traders said.

The flagship copper contract ended the day just $7.50 down at $1,685.5 a ton while aluminum climbed $1 to $1,504 a ton.