RI palm oil prices likely to edge lower

RI palm oil prices likely to edge lower

KUALA LUMPUR (Reuters): Indonesian palm oil prices are expected to edge lower this week after the government's decision to impose export quotas in a bid to boost local supply, traders said.

"The market is likely to weaken this week because of the quotas," an Indonesian trader said. "Buyers have also been mostly sidelined since the government announced the quotas."

Meanwhile, the Singaporean and Malaysian markets are seen looking for direction with a weaker Malaysian ringgit offset by poor November export figures, regional traders added.

Indonesia has decided to limit total 1998 palm oil exports to 2.43 million tons in a bid to boost domestic demand and keep local prices at "reasonable" levels.

Indonesia also plans to limit palm oil exports to 147,841 tons of crude palm oil-equivalent this December, 67,400 tons in January 1998 and 121,400 tons in February.

Indonesia traders said details of how the quotas will be farmed out to individual companies were still unclear.

"Producers and exporters have not been informed on how much each of them can export and how much they will have to supply to the local market," an Indonesia trader said.

Singapore traders said the absence of news from Indonesia on how it will impose restrictions on its imports is adding to the uncertain mood in the palm market.

Indonesian palm olein prices ended last week at 1,780 rupiah/kg in Jakarta against 1,870 rupiah a week ago.

Trading in palm oil will also be uncertain in Singapore and Kuala Lumpur.

"Palm is just drifting along. People are just standing back -- not selling and not buying either," a European dealer in Singapore said. "The export figures were definitely not friendly."

Another dealer added: "I think there's some weakness being shown in the market. The export numbers are down, stocks are up. The only thing holding palm up is the weakness of the ringgit." Malaysia's cargo surveyor SGS (M) Sdn Bhd estimated Malaysia's palm oil exports for November 1-20 at 362,140 tons against 486,472 for October 1-20.

Malaysia's Palm Oil Registration and Licensing Authority (PORLA) said stocks at end-October reached 1.025 million tons. "The bearish stock figure has sparked some nervousness in the palm market and more selling would be seen this week," said a senior trader in Malaysia. Ivan Wong, a crop forecaster, on Friday again projected end-November stock above one million tons, at 1.025 million tons.

"But there's still a bit of consumer demand in Europe. The next wave of demand should come from the Middle East. I think you'll see that come in by early next year," a dealer in Singapore said.

Malaysia's benchmark third month February futures contract which closed on Friday at 1,768 ringgit, is likely to fall to strong support of 1,700 ringgit per ton, traders said.

"The probability of the market pulling back to 1,700 is great," a Singapore dealer said, adding that if it breaches that level, the next level of support will be at 1,650.