SE Asian palm oil markets bullish

SE Asian palm oil markets bullish

KUALA LUMPUR (Reuter): South East Asian palm oil markets should maintain a bullish trend in the coming week, supported by good export prospects and upbeat currency and technical factors, regional traders said yesterday.

"It's up, up and up. We're seeing a lot of buying right now and this should continue this week," a European dealer said.

"Technically, the market is looking bullish. On fundamentals, we are seeing good offtake everywhere from the Europeans to the Indians and the Chinese," said a senior dealer.

Palm oil futures prices hit limit-up of 50 ringgit a ton on the Kuala Lumpur Commodity Exchange on Friday, with benchmark third month December futures closing the week at 1,434 ringgit a ton.

Singapore traders said that a squeeze in spot October futures due to a tightness in the availability of freight to ship palm oil supplies could also aid sentiment.

"We may see a bit of a squeeze in October," said a Singapore trader.

An Indonesian trader said: "We are quite happy with the present trend and expect market sentiment to remain bullish this week. In addition, the tight supply is also a factor boosting the domestic market."

"In general, supply is tight because of the decline in the output of palm oil in the wake of the drought."

Indonesian palm olein was stable at 1,700-10 rupiah/kg last week in Jakarta while crude palm oil was quoted at 1,460 rupiah/kg in north Sumatran city of Medan.

Traders said weak regional currencies against the U.S. dollar has been the main boost to the market.

"It's much cheaper to buy palm oil if the ringgit softens further and would be an advantage for our exports," a trader in Kuala Lumpur said. The ringgit hit an all-time low of 3.0710 to the dollar on Monday morning.

Palm oil markets are also awaiting fresh fundamentals including Malaysian palm oil exports for September 1-20 and September output/export/stock estimates from crop forecaster Ivan Wong, both due on Monday.

Singapore dealers said a drought spawned by the El Nino weather pattern is beginning to hit palm oil farms in Indonesia, but the effect in the market will not be seen until possibly late 1998.

"The effect should kick in probably late next year. There's normally an 18-month lag time before this kind of thing affects the market," a dealer said.