Palm oil inventories in Malaysia to drop first time in 4 months

05.01.2017

Palm oil stockpiles in Malaysia likely fell last month for the first time since August as production in the world’s second-largest grower dropped by the most in almost a year.

Stockpiles fell 2.4 percent from November to 1.62 million metric tons, according to the median of eight estimates from planters, traders and analysts surveyed by Bloomberg. Estimates in the poll ranged from 1.46 million tons to 1.70 million tons, with two respondents forecasting an increase. Crude palm oil production fell 8.9 percent to 1.43 million tons, the biggest drop since January 2016. Exports weakened for the fourth straight month to 1.31 million tons, a 4.4 percent drop, to the lowest since June, the survey showed.

The price of the commodity used in everything from cooking oil to lipstick surged 25 percent in 2016, capping the biggest rally since 2010 as the lingering effects of one of the strongest El Ninos on record curbed production in the biggest growers. December output of 1.43 million tons would take Malaysia’s 2016 production to 17.28 million tons, 13 percent less than 2015 and the lowest since 2010.

The weak production alongside small stockpiles could keep prices at about 3,000 ringgit ($667) a ton in the first quarter, Maybank Investment Bank analyst Ong Chee Ting wrote in a Jan. 4 report.

“Low supplies will underpin prices," Donny Khor, deputy director of futures and commodities at RHB Investment Bank Bhd. said from Kuala Lumpur, adding that the drop in the ringgit is also supporting prices. The ringgit traded at 4.4975 ringgit per dollar on Wednesday, the lowest since 1998.

Palm oil for March delivery on Bursa Malaysia Derivatives closed 0.7 percent lower at 3,141 ringgit on Wednesday.


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