KUALA LUMPUR: Palm oil inventories likely slumped to a 14-month low in August as exports jumped.
Stockpiles fell about 7% from a month earlier to 2.22 million metric tonnes, the biggest decline in three months and the lowest since June 2018, according to the median of 12 estimates in a Bloomberg survey of analysts, traders and plantation executives.
Strong demand from India and China over the past few weeks, lower production and steady domestic consumption are expected to have squeezed palm oil stockpiles by the end of August, according to Nagaraj Meda, managing director of Hyderabad-based TransGraph Consulting Pvt.
Inventories are likely to stay below 2018 levels during the rest of this year and keep sentiment bullish, he said.
The market is expected to see a correction in October as festive buying by China and India may be over by then, he added.
The focus will also be on a potential hike in India’s import duty on refined palm oil from Malaysia. The top buyer has recommended raising the tax by 5% for 180 days, which could curb shipments. The tax recommendation still needs vetting by the finance ministry.
Palm oil prices may average RM2,200 per tonne in the July-September period as well as in the fourth quarter, before rising to RM2,300 in the first quarter of 2020, according to Rabobank International.
The prediction is based on the assumption that Indonesia will increase its biodiesel mandate to B30 in January and China will boost purchases due to a reduction in soybean oil availability.
Stockpile estimates in the survey ranged from 2.11 million tons to 2.42 million tons
Output forecasts varied from 1.66 million tons to 1.83 million tons, with 6 respondents forecasting a monthly increase.
Estimates for exports were between 1.57 million and 1.72 million tons.
Malaysian imports are forecast to rise to 60,000 tonnes in August from 36,664 tonnes in July. Estimates for domestic consumption ranged from 200,000 tonnes to 310,000 tonnes.
Exports advanced about 14% to 1.70 million tonnes, according to the survey, the biggest monthly increase since March. Crude palm oil production was flat at 1.74 million tonnes.
The Malaysian Palm Oil Board will release official data on Sept 10.