Palm oil prices vulnerable to setback-Oil World

HAMBURG, May 8 (Reuters) - Palm oil prices remain vulnerable to a setback from their recent highs with bearish factors including larger than expected Indonesian production, Hamburg-based oilseeds analysts Oil World said.
Malaysian palm oil futures reached eight-year-highs last week because of strong exports coupled with smaller than forecast Malaysian output.
`Malaysian palm oil production was smaller than expected in February and March this year and it is generally expected that the seasonal recovery in April was not sufficient to prevent a further decline in Malaysian stocks as of end-April,` Oil World said.
`However, the market is vulnerable to a price reaction. This could come from demand losses or better than expected Malaysian palm oil production numbers for April or May.`
Another bearish factor was a forecast substantial rise in Indonesian palm oil production, it said. Oil World has raised its forecast of Indonesia's 2007 calendar year palm oil output to 17.15 million tonnes from an estimated 16.08 million tonnes in 2006.
`Although several parts of Indonesia have registered considerably dryer than usual conditions since mid-2006, a bearish factor for Indonesian palm oil will be the accelerating growth in the mature oil palm area in 2007 and 2008 following the previous aggressive plantings,` it said.

Source : Reuters.com