Palm oil stockpiles seen at 10-month low

Crude palm oil production eased 1.8% to 1.62 million tonnes, the lowest since February. (AFP pic)

KUALA LUMPUR: Palm oil inventories in Malaysia, the world’s second-biggest grower, likely shrank to the smallest in 10 months in May as overseas shipments rose on festive demand.

Stockpiles fell about 10% from April to 2.46 million metric tonnes, which would be the steepest monthly decline since August 2016, according to the median of eight estimates in a Bloomberg survey of analysts, traders and plantation executives.

That would bring stockpiles to the lowest level since July.

Crude palm oil production eased 1.8% to 1.62 million tonnes, the lowest since February, while exports rose 3.6% to 1.71 million tonnes, the highest monthly level since August 2016, according to the survey.

The Malaysian Palm Oil Board will release official data on June 12, it said.

“Even as inventories ease, we are now entering the yearly main harvesting period and Indonesia has been in a high production cycle since April,” according to Marcello Cultrera, institutional sales manager at Phillip Futures Sdn in Kuala Lumpur.

It’s also worth watching Malaysia’s import levels in May, he says. Malaysian palm prices have recently been about US$30 a tonne more expensive than those in nearby Indonesia and that may encourage imports.

Crude palm oil prices are expected to face a sharp downtrend in the near term in line with the bearish momentum in crude oil as well as palm traded in Dalian and Singapore markets.

Benchmark futures will likely trade between RM2,000 and RM2,250 a tonne in the second half of the year as demand improves, especially from India, according to the world’s biggest palm planter Sime Darby Plantation Bhd.

Estimates in the survey for palm stockpiles ranged between 2.31 million tonnes to 2.50 million tonnes.

Output estimates varied from 1.60 million tonnes to 1.68 million tonnes, and for exports 1.65 million to 1.77 million tonnes.

Malaysian palm oil imports are forecast to climb to 70,000 tonnes in May from 62,112 tonnes the previous month.

Estimates for domestic consumption ranged from 220,000 tonnes to 330,000 tonnes.