Malaysian palm oil reserves surge to 3-year high on output

PALM oil stockpiles in Malaysia climbed to their highest level since November 2019 as production in the second-biggest grower jumped and intensified competition from rival Indonesia hurt overseas shipments. 

Inventories rose 18.2% from a month earlier to 2.09 million tonnes in August, the Malaysian Palm Oil Board said on Monday.

That’s higher than the 2.05 million tonnes estimated in a Bloomberg survey, and is the first time stockpile breached the psychological level of two million tonnes in more than two years. 

Production of crude palm oil surged 9.7% to 1.73 million tonnes, the highest since October and more than 1.7 million predicted in the survey. However, exports fell 1.9% to 1.3 million tonnes, compared to the forecast of 1.32 million tonnes. 

The palm market is in an oversupplied state as the peak production season has started strongly and exports from Indonesia have risen, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

Exports fell more than expected, while production posted its best increase this year on good weather, although it was limited by labour shortages, he said.

Benchmark palm oil futures have halved since reaching a record high at the end of April as Indonesia boosted shipments after a temporary ban, shrinking Malaysia’s export market share. Supplies are poised to rise during palm oil’s high production season that generally runs from July to October. 

Still, a bright spot for palm could be a rise in export demand in the coming weeks as the tropical oil has become relatively more competitive to other edible oils such as soybean and sunflower oils. Malaysian exports rose 16.2% in the first 10 days of September, compared to the same period a month earlier, according to cargo surveyor Intertek Testing Services.

“Prices will see a recovery as buying picks up,” Varqa said. Exports may get a boost in September on higher demand ahead of festivals as India will celebrate Deepavali and China will have the Golden Week celebrations, he said. 

Futures for November delivery swung between gains and losses in Kuala Lumpur, rising as much as 1.8% and falling as much as 0.7%, before trading at RM3,605 ringgit a tonne by the midday break. — Bloomberg / pic Muhd Amin Naharul