Despite the good news, the market remains on edge over Indonesia’s export halt

by BLOOMBERG / pic TMR FILE PIC

PALM oil stockpiles in Malaysia jumped to a five-month high in April as production ramped up in the world’s second-biggest supplier.

Inventories climbed 11% from a month earlier to 1.64 million tonnes, according to the Malaysian Palm Oil Board (MPOB).

That’s roughly in line with a Bloomberg survey that predicted 1.66 million tonnes and is the highest since November.

Production of crude palm oil rose 3.6% to 1.46 million tonnes, slightly below forecast but is also at the highest in five months. Exports slumped 18% to 1.05 million tonnes, the lowest since February 2021, according to MPOB.

While the April’s data painted a picture of easing supply tightness, the market remains on edge over Indonesia’s export halt. The top producer has imposed a sweeping ban on palm oil shipments since

April 28 to protect its domestic market, adding to the impact of Russia’s invasion of Ukraine, which cut off supplies of sunflower oil and reduced availability of edible oils globally.

Malaysia’s exports will likely surge in May due to the Indonesian ban, said Anilkumar Bagani, head of research at Mumbai-based Sunvin Group.

Production may also be lower this month than April due to the Aidilfitri holiday, he added.

“At this point, the fresh destination demand will be key,” Bagani said.

Palm oil futures were lower before the MPOB data, falling 1.5% to RM6,311 ringgit a tonne as of the trading break.

Still, prices remain about 34% higher this year as the war in Ukraine and weather-driven supply woes crimp global supplies of edible oils. Palm oil is the most-consumed vegetable oil.

There are signs that high prices have hurt demand in top buyers. China’s edible oil imports plunged in April to the lowest since 2015, partly due to the strict Covid-19 lockdowns as well.

Palm oil purchases by India, the world’s biggest importer, are estimated to drop in May to a 15-month low.

The MPOB’s report is “neutral to mildly bearish” given the rise in stockpiles, said Gnanasekar

Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental.

“Since prices have fallen quite sharply lately, we can expect some bargain hunting activity in the coming half session.”