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.