Indonesian Palm Reserves Seen Dropping by Bangun as Demand Gains

Palm oil inventories in Indonesia, the world’s largest producer, may drop 8 percent this year as a significant increase in demand outstrips record supplies, according to Derom Bangun, chairman of the nation’s palm board.

Stockpiles of the oil used in food and fuels may contract to 2.3 million metric tons from the 2.5 million tons estimated at the end of 2012, said Bangun, who is scheduled to speak this week at an annual palm conference in Kuala Lumpur arranged by Bursa Malaysia Bhd. Production may reach an all-time high of about 30 million tons, Bangun said in a phone interview from Jakarta, reiterating a forecast made on Feb. 18.

The world’s most-used cooking oil is mired in a bear market as supply and stockpiles have surged to records. Futures on the Bursa Malaysia Derivatives lost 23 percent last year as an economic slowdown in China and the European debt crisis curbed demand. Dorab Mistry, a director at Godrej International Ltd. who’s traded the oil for more than three decades, has said the outlook for 2013 is bearish as global oilseed supplies increase.

“Although there will be an increase in production in both Indonesia and Malaysia, I strongly believe that at the same time there will be a significant increase in demand in India, China, Indonesia and Europe,” said Bangun. “Demand will slightly exceed supply. So I’m bullish.”

Palm futures on Bursa Malaysia Derivatives, a unit of the Bursa Malaysia, closed at 2,368 ringgit ($765) a ton on March 1 after dropping for eight days in the worst run since 2006. Bangun declined to give a price forecast before his March 6 presentation at the Palm and Lauric Oils Conference & Exhibition.

(Source: Bloomberg)