SE Asian palm oil prices seen weak on production rise

SE Asian palm oil prices seen weak on production rise

KUALA LUMPUR (Reuter): Southeast Asian palm oil prices are likely to be weak this week as rising production continued to run ahead of demand, regional traders said.

Palm markets are awaiting key Malaysian official crop data for June, due out around 0430 GMT on July 15, to provide a clearer picture, regional traders said.

Malaysia's Palm Oil Registration and Licensing Authority (PORLA) will release June output, stocks and export figures.

"I think the PORLA report will give some direction on where prices will head," an Indonesian trader said. "Malaysia's production and export levels will be the key."

A trader in Malaysia added the other key figure is the level of stocks, which is expected to be higher due to slow demand and high harvesting months.

Singapore traders added official figures from PORLA are not expected to lend support to the market, with production and stocks in June seen rising strongly.

Ivan Wong, a private crop forecaster, last week projected June's output at 785,000 tons and exports at 595,000 tons versus May's 626,606 tons. He put end-June stocks at 795,000 tons against 711,841 in May.

"We keep increasing production. Demand is okay, but it's not enough," a dealer for a foreign trading house in Singapore said, adding exports need to hit more than 700,000 tons a month to nudge prices higher.

"I think the PORLA numbers will be bearish. Everybody is feeling down at the moment," said another Singapore dealer.

Regional traders added soft soyoil prices in Chicago would also push the palm price lower, along with the fact that palm is still seen as relatively more expensive than soy.

Malaysia's benchmark September futures contract, which closed on Friday at 1,128 ringgit, was seen testing the 1,100 ringgit a ton floor this week.

"It'll definitely test 1,100," said a senior trader. "If the September futures contract breaks 1,120, then 1,090 is the next target."

A trader in Singapore added: "The market is looking for a bottom. Buying sentiment is weak."

Sustained thin buying interest coupled with increasing supply amid declining export prices could ease Indonesian palm olein prices, traders said.

"Export prices are almost on par with local prices, and this could see more oil entering the local market," an Indonesian trader said. "There is talk that one company had already canceled an export shipment and redirected the oil into the local market."

The trader added: "I think local prices could also weaken this week as buyers wait for prices to edge further down." Indonesian palm olein finished last week at 1,375-80 rupiah/kg in Jakarta, compared with 1,350 a week ago.