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.