Malaysian palm oil stocks in September recorded an unexpected increase to reach the highest level in 2 years

Malaysian palm oil stocks unexpectedly increased for the seventh straight month in September and reached their highest level in almost two years, as higher imports amid weak local demand outweighed a slight drop in production, industry regulator data showed on Friday.

Rising tropical oil supplies in the world’s second-largest tropical oil producing country could weigh on Malaysia’s FCPO1! futures contract, which trades at a premium compared to rival soybean oil futures contracts.

Malaysian palm oil stocks rose 7.2% in September to 2.36 million metric tons compared to August, Malaysian Palm Oil Board (MPOB) data showed.

Crude palm oil production halted its two-month rise, falling 0.73% to 1.84 million tonnes on month, while exports rose 7.69% to 1.43 million tonnes, the highest since November last year.

A Reuters survey estimated inventories at 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 shares well above expectations, said Anilkumar Bagani, head of research at Mumbai-based edible oil broker Sunvin Group.

This reflects supply-side improvements that could weigh on near-term price sentiment, Bagani said.

“Resilience in production, despite expectations of seasonal moderation, is adding to supply pressures,” he said.

Although exports signal a recovery in outbound demand, the year-on-year decline has dampened optimism, he added.

“The next direction for the market will depend on future demand indicators and policy developments in the biofuel sector,” he said.

Meanwhile, a New Delhi-based dealer with a global trading house said October production is likely to be higher than September.

“With exports slowing slightly, stock levels are expected to continue to increase,” the dealer said.
Source: Reuters