Palm oil prices up on news of riots

Palm oil prices up on news of riots

LONDON (Reuters): Tight supplies and concern over escalating riots in Indonesia triggered a surge in crude palm oil prices at the opening of the European vegetable oil market yesterday.

Reports of rioting in the Indonesian commodities trading city of Medan following an increase in fuel prices caused concern at the European opening.

"People are watching the situation very carefully in case the trouble spreads," one trader said.

"The one thing people feared more than the palm oil export ban was unrest," said another trader.

Traders in Indonesia said transport of crude palm oil was slow due to fears that road tankers may be attacked.

Crude palm oil opened in Europe $15 up but no early trade was reported.

Palm olein trade was active with spot fetching $720, May $712.50, Jun $697.50, $700, $705, $707.50 and Oct/Dec $660 a ton fob Malaysian ports.

Coconut oil prices were carried higher by palm oil with opening offers $15 to $10 up.

In Jakarta, the Indonesian palm olein market was quiet in late trading yesterday after riots in the commodity trading city of Medan in North Sumatra frightened buyers away from taking positions, traders said.

"The market is quiet. No buyers showed up in the afternoon, while traders are cautious about the whole thing," said one trader in Medan.

Traders say buyers are reluctant to buy stock if they see any risk of it being destroyed in social unrest.

Traders said olein, which is used as cooking oil, was being offered at 2,750 rupiah/kg, but there was no buying interest.

The government said yesterday the ex-factory cooking oil would stay at 2,750 rupiah/kg despite the increase in fuel prices.

"Cooking oil prices will not rise," Forestry and Plantations Minister Sumahadi said.

He said prices of cooking oil would hover at between 3,000 and 3,200 rupiah/kg when they reached buyers at the traditional market.

Sumahadi said the proposed tax on inter-island shipments of crude palm oil would not burden traders because it only served as a deposit in order to prevent smuggling.

He said the money would be reimbursed to the traders who would have to show their value-added tax invoices, adding that if the amount of oil which arrived at the destination did not conform with that written in the invoices, then the government would seize the money.