SE Asian palm oil prices likely to be firmer

SE Asian palm oil prices likely to be firmer

KUALA LUMPUR (Reuters): Southeast Asian palm oil prices are likely to be firmer this week with buyers expected to dominate trading on the back of good fundamentals, regional traders said.

Local currency fluctuations will also remain a key market factor.

"The fundamentals are still very supportive," a vegetable oil dealer in Singapore said. "The Indonesian ban is still on. I think the (Malaysian) ringgit will start to weaken again. Unless we see a drastic reduction from China and India, I'd still be long on palm."

Regional traders said the ban imposed by Indonesia on crude palm oil exports in a bid to stem rising cooking oil prices would not be lifted any time soon.

"If the ban continues, this will be good for us as palm buyers have to make more orders as Malaysia is the next alternative (to buying Indonesian palm oil)," said a senior trader based in Kuala Lumpur.

"We saw very good export numbers in January, and demand for February will remain as good, as people need to cover their positions and make fresh commitments for forwards," he said.

A European dealer in Singapore added that some buyers who have not covered for upcoming shipments will need to come in towards the end of the week.

"They're going to have to bite the bullet this week. You'll see people starting to scramble for their short February positions. This will help keep palm up. It's very hard not to be very bullish on palm at the moment," the European trader said.

Activity from regional traders buying from China has picked up and importers from that country are seen stepping up their purchases. "All the fundamentals point to a bullish picture," a trader in Singapore said.

Despite the underlying firm fundamentals, the market is also monitoring dollar/ringgit and dollar/rupiah movements.

"We are afraid if these currencies (ringgit and rupiah) firm, then the rise in palm oil prices would be checked," said a Malaysian trader.

"But it's difficult to say because everything is so volatile nowadays," said a trader in Singapore.

Indonesian traders said palm olein prices would be stable. "It is kind of hard to predict what's going to happen this week, but we hope prices will stay at the same level," said a trader in Medan, North Sumatra.

Indonesian palm olein finished last week in Jakarta at 2,800 rupiah/kg while in Medan, crude palm olein was quoted at 2,900 rupiah/kg on a 2,000-ton tender.

Malaysia's benchmark, third month May futures contract closed on Friday at 2,269 ringgit a ton. The contract trading limit for Monday is 100 ringgit a ton.