Malaysia's palm oil stocks rise at record pace as exports fall

Malaysian palm oil inventories rose at the fastest pace in five months in May amid a sharp decline in export shipments, Business Today reported, citing data from the Malaysian Palm Oil Board (MPOB).

 

According to the published report, palm oil stocks in the country increased by 5.2% in May compared to the previous month and reached 2.43 million tons.

 

The increase in inventories was more than double the median forecast of a 2.2% increase in a Bloomberg survey of respondents, who had expected a 2.2% increase. The main reason was a slowdown in export shipments as buyers began to actively purchase cheaper palm oil from Indonesia after changes in the country's export policy.

 

Palm oil exports from Malaysia fell by about 14% to a year-low of 1.11 million tonnes, while the market had expected a decline of only 6.2%.

 

Despite expectations that Indonesia's new export regime, announced late last month, would allow Malaysia to boost sales, this has not happened yet. On the contrary, buyers in India, China and other key importing countries continue to actively purchase Indonesian products thanks to more competitive prices.

 

According to analysts, competition between Indonesia and Malaysia may intensify in the coming months as Indonesian exporters seek to maximize supplies before the full implementation of the state export control system.

According to MPOB, Malaysia's crude palm oil production in May fell 7% to 1.52 million tonnes, while analysts had forecast a 4.9% decline.

 

After the report was released, July palm oil futures on the Malaysian stock exchange rose by 0.3% on Thursday, but fell by 1.7% on Friday to 4,475 ringgit or $1,100/t.

 

The sharp drop in oil prices is putting additional pressure on the market. Against the backdrop of rising inventories and weakening demand for biofuels, the decline in oil quotes could accelerate the decline in palm oil prices this week.