“The fall in stocks in Malaysia, the world’s second-largest palm oil producer after Indonesia, would support benchmark futures, which are currently trading near their lowest level in seven months.

“Malaysia’s palm oil stocks at the end of July fell 5.35% from the previous month to 1.73 million metric tonnes, the lowest since March,” said the industry regulator.

MPOB said crude palm oil production gained 13.97% from June to 1.84 million tonnes, while palm oil exports rose 39.92% to 1.69 million tonnes.

A Reuters survey had forecast inventories at 1.80 million tonnes, with output at 1.82 million tonnes and exports at 1.52 million tonnes.

“The fall in stocks is bullish for palm oil prices as inventories have eased, defying market expectations of a slight increase.

“Stocks are now at the same levels as last year,” said Mumbai-based Sunvin Group research head Anilkumar Bagani.

However, a New Delhi-based dealer with a global trade house said a sharp rise in palm oil prices is unlikely as the market anticipates strong production in August amid lower exports.

Exports of Malaysian palm oil products for Aug 1-10 fell 17.7% to 435,413 tonnes.

“Even after the recent drop in prices, palm oil’s discount to rival soyoil and sunoil is still far lower than normal.

“It needs to correct further, or rival oils need to increase in price to make palm oil more attractive,” the dealer said.