Malaysia Nov palm oil stocks seen rising to near 2-year high

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KUALA LUMPUR (Dec 6): Palm oil inventories in Malaysia are forecast to rise to the highest in nearly two years at end-November, as a fall in exports outpaces a decline in production, a Reuters poll showed.  

Stockpiles are expected to swell 11.4% to 2.44 million tonnes from end-October, which would be the highest level since December 2015 and mark a fifth consecutive month of gains, according to a median of nine planters, traders and analysts polled by Reuters. 

Rising inventories could put pressure on benchmark palm oil prices, which are currently around four-month lows. Palm was last down 0.2% at 2,557 ringgit (US$629.03) on Wednesday morning.

Production of the edible oil, commonly used in the making of everything from cooking oil and soap to cosmetics, is expected to have dipped around 3% in November, from the previous month to 1.95 million tonnes.

"The production peak has passed. We believe October represented peak production for the year, and expect softer production up to January next year with the advent of the monsoon season," said Voon Yee Ping, an analyst at Kenanga Research in Kuala Lumpur.

Palm oil output usually reaches a seasonal peak during the third quarter, then tapers off until the first quarter of the following year.

Annual year-end monsoon rains have contributed to flooding in the east coast of Peninsular Malaysia this year, sparking concerns that floods could disrupt the harvest and curb near-term palm oil production.

Exports are also expected to have softened in November, falling faster than production to be down 6% on a month earlier at 1.45 million tonnes, the first monthly decline in five months.

"Most of the northern hemisphere countries are at the winter season from now until January, demand from India is also likely to be subdued for the time being," said a Kuala Lumpur based trader. 

"Demand could pick up somewhere in January, maybe from China if they plan on restocking ahead of the Lunar New Year, but overall demand should be stable towards mid-February or early March as Ramadan approaches," said the trader.

Major festivities like the Chinese Lunar New Year and the Muslim holy month of Ramadan typically lead to higher usage of palm oil for cooking purposes. 

Palm oil consumption, however, generally falls in the last quarter of the year when the northern hemisphere enters winter, curbing demand from regions like China and Europe, as palm oil solidifies in cold temperatures. 

November demand from India, the world's largest edible oil importer, is also expected to slow after it raised import taxes to the highest in more than a decade.

The median figures from the Reuters survey imply Malaysian consumption of 259,621 tonnes in November. 

Official data will be released by the Malaysian Palm Oil Board after 0430 GMT on Dec 12. 
        
 Breakdown of November estimates (in tonnes):

  Range Median
Production 1,747,700 - 2,034,000 1,948,576
Exports 1,440,000 - 1,560,000 1,455,801
Imports 9,760 - 32,104 16,740
Closing Stocks 2,250,000 - 2,495,000 2,440,000

* Official stocks of 2,190,106 tonnes in October, plus the above-estimated output and imports, give a total November supply of 4,155,422 tonnes. Based on the median of the exports and closing stocks estimates, Malaysia's domestic consumption in November would be 259,621 tonnes.

(US$1 = 4.0650 ringgit)