KUALA LUMPUR: Malaysia’s end-September palm oil stocks fell more sharply than expected as export demand surged while production stayed flat, according to data by the palm oil board yesterday, supporting prices that are already trading near all-time highs.
Inventories at the world’s second-largest producer dropped 6.99% from the previous month to 1.75 million tonnes, falling from a 14-month peak, data from the Malaysian Palm Oil Board (MPOB) showed.
Crude palm oil production failed to sustain the growth seen in August as a severe labour shortage hammered output during the peak production season. September production shrank 0.39% to 1.7 million tonnes.
“Much of the market assumed that production had improved enough to avoid a supply squeeze, but much to our chagrin that is not happening at least not for the immediate months,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
Exports surged 36.83% to 1.6 million tonnes, the highest level this year. Imports fell nearly 18%.
Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics, said the data confirms market expectations that supply would remain tight in the near-term, raising the prospect of higher prices.
Malaysia’s benchmark crude palm oil futures surpassed record highs of RM4,900 a tonne last week and the bullish report could push prices to break RM5,000 a tonne.
Total production for 2021 will likely fall to around 18.2 million-18.4 million tonnes unless production picks up in the next two months, Paramalingam said. That would be a decline from 19.14 million tonnes produced last year. — Reuters