Vessels to ferry palm oil within Asia could be in scarce supply until at least mid-February as movement of industrial fuels dominate due to high bunker prices, freight brokers said on Monday. The trade will get a break from February 9 for celebration of the Lunar New Year in China, Hong Kong and Singapore, lasting unofficially for a week even in mostly-Muslim Malaysia. Following that, more space might become available as loading for end-February and March begin, said brokers.

"I'd say the market will be tight for another two weeks at least, although our biggest relief now is that India has eased off," said a freight agent, referring to reduced recent buying by the world's largest edible oil importer.

"If the bunker rates come off from their present highs over the next few days, we could see things loosening up faster."

Palm oil exporters have been left with few options to carry their oil since mid-January as buyers of "clean petroleum products" fuel mainly used for industrial purposes started paying more for vessels amid a spike in bunker prices.

Bunker rates eased in Singapore's on Friday trade as sellers turned aggressive, having sold out for January and looking far into February.

But premiums remained relatively high, coming down by only 62.5 cents to $3.63 a tonne. Cargo rates for palm oil from Malaysia and Indonesia, the world's largest and second-largest producers, fell up to $3 a tonne on Friday from a week ago due to fewer takers.

Palm oil traders said some freight brokers were quoting 30 percent above usual rates for certain destinations last week and space was fully booked between February 1 and 15. The bleak shipment situation has cast a shadow on Malaysian palm oil exports and prices. At noon on Monday, the benchmark third-month crude palm oil contract on Bursar Malaysia Derivatives, April, was down 7 ringgit, or half a percent, at 1,275 ringgit ($335.52) a tonne.

Dealers blamed the weaker market on disappointing export estimates for January.

Copyright Reuters, 2005