KUALA LUMPUR (June 11 2003) : India, the world's largest edible oilconsumer, is overbought and unlikely to buy more oil in June, puttingpressure on volatile palm oil prices, traders said on Tuesday.
Malaysian palm oil futures have fallen by nearly 18 percent since touchinga four-year peak at 1,695 ringgit on December 30.
The market is now struggling to trade above the key 1,400-ringgit supportlevel. "India needs to digest the stocks. They are definitely overbought,"said one freight broker in Malaysia.
"India's shipment bookings for June are close to 350,000 tonnes.
I don't think it's going to go up. Lifting in May was more than 600,000tonnes," he said.
Worries about the slow progress of monsoon rains and a volatile palm oilmarket had triggered heavy buying by Indian importers in April and May.
India normally imports around 400,000 tonnes of palm oil a month fromMalaysia and Indonesia. Rains finally arrived in India last week, ending aheat-wave that sparked worries of another drought after the one last year.
Traders said palm oil exports from Malaysia, the world's largest producer,could fall by 20 percent to 800,000 tonnes in June because main buyerslike India and China were already well covered.
On Tuesday, cargo surveyor ITS provided indication of falling demand,saying Malaysia's palm oil exports for June 1-10 fell to 351,625 tonnesfrom 384,653 tonnes for May 1-10.
"We did expect palm oil prices to go up, but there's a big question nowbecause India is stagnant," said the freight broker.
On Tuesday, the benchmark third-month August contract was five ringgithigher at 1,426 ringgit ($ 375.26) a tonne mainly due to talk of tightsupplies in Malaysia.
Traders said China, another main buyer, may trim palm oil imports in Junebecause it had bought large quantities of South American soyaoil ahead ofthe summer months.
Some said China had purchased up to 180,000 tonnes of soyaoil, which ispalm oil's main competitor, for June and July shipments.
"I think China's palm oil imports will fall to 200,000 tonnes this month.
We bought 250,000 tonnes of palm oil in May," said one trader in China.Palm oil is mostly used in China's instant noodle industry.
Some traders in Malaysia said tight domestic supplies would lend supportto palm oil futures, but others were cautious.
"Its true people are talking about tight supplies. But strangely, eachtime the market goes up, you will see plenty of stocks in the market,"said one physical dealer.-Reuters