KUALA LUMPUR: Malaysia’s palm oil stocks unexpectedly rose for the seventh consecutive month in September to hit their highest in nearly two years, as higher imports amid weak local demand outweighed a slight output decline, industry regulator data showed on Friday.
Rising inventories in the world's second-biggest producer of the tropical oil could weigh on benchmark Malaysian futures , which are trading at a premium over rival soyoil futures.
Malaysia's palm oil stocks rose 7.2% in September to 2.36 million metric tons from August, Malaysian Palm Oil Board (MPOB) data showed.
Crude palm oil production broke a two-month rise, slipping 0.73% to 1.84 million tons on the month, while exports rose 7.69% to 1.43 million tons, the highest since November last year.
A Reuters survey had forecast inventories of 2.15 million tons, with output at 1.79 million tons and exports at 1.43 million tons. MPOB delivered a mild surprise to the market with stocks that were notably above expectations, said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group.
It reflects a supply-side buildup that could weigh on near-term price sentiment, Bagani said.
"The resilience in production, despite seasonal expectations of moderation, is adding to the supply pressure," he said. While exports signal some recovery in outbound demand, the year-on-year decline has tempered optimism, he added.
"The market’s next directional cues will hinge on forward-looking demand indicators and policy developments in the biofuel space," he said. Meanwhile, a New Delhi-based dealer with a global trade house said October’s production is likely to be higher than September.
"With exports slowing a bit, stock levels are expected to rise further,” the dealer said. - Reuters
