KUALA LUMPUR (March 10): Malaysia's palm oil inventories fell for a second month in February to the lowest in four months, as a seasonal drop in production outweighed slower exports and a surge in imports, the industry regulator said on Tuesday.
Falling inventories in the world's second-biggest producer of the tropical oil could support benchmark Malaysian futures.
Malaysia's palm oil stocks fell 3.9% in February from the previous month to 2.70 million tonnes, the lowest level since October, the Malaysian Palm Oil Board (MPOB) said.
Crude palm oil production declined 18.6% from January to 1.28 million tonnes, while palm oil exports fell 22.5% to 1.13 million tonnes, the MPOB said.
A Reuters survey had forecast inventories at 2.63 million tonnes, with output seen at 1.3 million tonnes and exports at 1.18 million tonnes.
Malaysia's imports in February more than doubled from a month earlier to 76,276 tonnes, limiting the decline in stocks.
The imports surged as Indonesian palm oil was cheaper than Malaysian supplies, with sellers rushing to ship cargoes before additional export levies became effective in March, said Anilkumar Bagani, research head at vegetable oil broker Sunvin Group.
Indonesia has raised its crude palm oil (CPO) export levy to 12.5% of the CPO reference price from 10%, a move officials have said aims to finance an increased biodiesel blending mandate.
Malaysian stocks are likely to fall further in March as production declines, though the extent of the drop will also depend on exports, said a Mumbai-based dealer with a global trade house.
"Exports in the first 10 days were higher than last month, and the ongoing conflict in the Middle East could boost palm oil demand even though it has become as expensive as soyoil," the dealer said.
Rising crude oil prices and higher freight rates driven by the Middle East conflict could boost demand for palm oil from the biodiesel sector and for food use, industry officials told Reuters.
