Malaysia palm oil stocks seen slightly rising on export drop — Reuters poll
KUALA LUMPUR: Palm oil inventories in Malaysia likely rose slightly in June as exports from the world’s second-largest producer slumped, but an unexpected drop in output capped stockpile gains, according to a Reuters poll.
With only minimal stockpile gains, declining production is seen supporting benchmark palm oil prices which have rose to their highest since May 26.
Palm climbed to has much as RM2,559 per tonne in early trade on Thursday, in line for a fourth consecutive session of gains.
End- stocks are forecast to slightly gain in June, up 0.2 per cent to 1.56 million tonnes from the previous month, according to the median of responses in a survey of nine traders, planters and analysts. This would be the lowest June stockpile levels since 2010.
Falling exports like ly contributed to the rise in stockpiles, as seasonal demand ahead of the Muslim fasting month of Ramadan declined. Exports last month are forecast to drop 8.2 per cent from May to 1.38 million tonnes, its first monthly drop in four months, the Reuters poll showed.
Ramadan sees devotees break day-long fasts with communal feasting that increases palm oil consumption for cooking purposes in India, Indonesia, Malaysia and the Middle East.
Buyers typically stock up on palm oil a month before Ramadhan, which began in late May this year.
“The weaker exports in June were due to weaker demand from China, India and the EU as the consuming countries may have stocked up ahead of the Ramadan festival,” said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
“Lower demand from China could be due to higher soybean imports and crushing activities.”
Chinese soya oil, palm’s rival oilseed, has dropped over 15 per cent since the start of the year due to a glut of edible oils in the market, reducing the need for palm oil imports from top producers Malaysia and Indonesia.
The survey also forecast a drop in production at 1.62 million tonnes in June, down 2.1 per cent from 1.65 million tonnes in May.
Palm oil output is expected to rise in line with seasonal trends in the second half of the year, but June production is seen falling due to Eid- al- Fitr, the holiday which marks the end of Ramadan, as workers go on leave.
“Production wise, we feel that growth may weaken slightly this month as workers will be on holiday to celebrate Eid,” said a trader with a plantations operator.
Indonesia and Malaysia, which produce nearly 90 per cent of global palm oil, are Muslimmajority countries that observe Ramadan and Eid, leading to a shortage of workers to harvest fruit.
The median figures from the Reuters survey imply Malaysian consumption of 285,619 tonnes in June. — Reuters