KUALA LUMPUR: PublicInvest research believes the Malaysian palm oil sector is off to a good start in 2019 as inventory levels fell 6.7% month-on-month to three million metric tonnes (mt) on the back of lower production and stronger exports.
"Jan palm oil inventory fell for the first time in 8 months, down 6.7% MoM, to 3.03m mt, which is slightly below market expectations," said the research house on Tuesday.
"Consequently, stock-to-usage ratio slipped from 15.7% to 12.3% as export demand grew while production declined."
CPO exports jumped to the highest level since August 2016 as it rallied 21.2% month-on-month to 1.67 million mt.
The EU showed the strongest increase in demand of more than 160%, followed by China (18%) and India (12%), following the downward revision for CPO import duty.
Meanwhile, CPO production fell 3.9% month-on-month to 1.73 million mt, which was its lowest since September 2018.
PublicInvest noted that the decline in national production was mainly from East Malaysia, down 8.6% month-on-month while production in Peninsular Malaysia was marginally higher.
CPO futures rallied more than 16% to RM2,270/mt after falling to its lowest in two years as the market saw signs of decline in the record high inventory level during the low production season.
PublicInvest sees another tough quarter for most plantation players in the upcoming quarterly results season as average CPO sport price was weaker in Q4 at RM1,920/mt.
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