Palm oil markets seen bullish

Palm oil markets seen bullish

KUALA LUMPUR (Reuter): Asian palm oil markets were expected to remain bullish this week as Indonesian forest fires raise concerns about the country's declining output, and on good prospects for export business.

Regional traders said strong palm offtake may come from India and China in anticipation of tight supplies in coming months.

"We're going to see pretty strong prices this week," a dealer for a foreign commodity house in Singapore said.

"The Chinese and the Indians are still buying at a pretty strong level. And now, you have the fires in Indonesia," he added.

Indonesian Agriculture Minister Sjarifudin Baharsjah said last week that forest fires that have blanketed Southeast Asia under a cloud of smog have spread to palm oil plantations, threatening palm oil output over the next year.

Palm oil traders in Indonesia said the haze would also have an impact on the ripening of fruit on the palm trees.

"The haze which is caused by the fires has blocked the sun, which hampers the development of the fruit," said one trader in Medan, the capital of the key growing area of North Sumatra province.

"Trees need sunlight but the smog is covering the light. Smog has been slowing down the fruits from ripening faster," the trader in Kuala Lumpur said. "This means we may expect tight supply in coming months. How much? We don't know," he added.

"We expect to feel the decline in production next month.

However, it is hard to make calculations on the percentage of the fall yet," added an Indonesian trader.

Apart from the forest fires, the palm market is still driven by currency factors, with regional currencies seen heading lower against the dollar, dealers said.