Indonesian palm oil prices extended a rally on Tuesday tracking gains in the neighbouring Malaysian market with buyers returning to the market before prices started rising further. In North Sumatra's Medan, crude palm oil prices rose nearly 5 percent to 7,300 rupiah ($0.830) a kilogram in an auction, from 6,965 rupiah last week.
"Malaysia has been rising since last Friday, that boosted local prices," said a trader in Medan, the key port for palm oil exports. He said speculative buying may have also boosted local prices. The state marketing centre which sells palm oil from state plantations did not hold any auctions on Tuesday.
Malaysian crude palm oil futures climbed almost 2 percent on midday Tuesday to reach a historic high after bullish comments from a leading industry analyst with the benchmark August contract rose 47 ringgit to 2,582 ringgit a tonne ($763).
But the August contract ended off record highs at 2,538 ringgit a tonne as players booked profits. In Jakarta, olein was sold at 7,700 rupiah a kilogram, up from 7,600 rupiah a kilogram on Monday. Traders said some producers have sold all their stocks allocated for a government programme to lower local cooking oil prices. Olein for the programme was sold at a fixed-price of 6,100 rupiah a kilogram.
"We have sold all olein stocks allocated for the programme. So we sell the regular ones," said a trader in Jakarta. The government said on Monday it is extending the programme which initially would have ended by the end of May since it failed to ease local cooking oil prices to a level of 6,500-6,800 rupiah a tonne.
According to the Industry Ministry, local cooking oil prices in May averaged 8,172 rupiah a kilogram as a number of crude palm oil producers did not release their stocks to cooking oil processors as asked by the government.
Since early May, the government has asked palm oil producers to release 150,000 tonnes of crude palm oil to cooking oil processors at lower prices to ease retail prices of cooking oil. Cooking oil is a staple and any rise in its price is politically sensitive. At the export market, sellers offered crude palm oil for June shipment at $790 a tonne, free on board Belawan, but buyers did not bid for the shipments. A few deals for October to December shipments were reported at $740 a tonne but details on the quantity and buyers were not available.