KUALA LUMPUR (Oct 11): Malaysian palm oil inventories will increase in October 2017 due mainly to seasonal improvements in yield and production levels in the month, according to analysts.

"Our initial estimates reveal that palm oil stocks will increase 6% month-on-month (m-o-m) in October 2017 to 2.14 million tonnes. We project October production to rise 6% m-o-m driven by seasonal improvements in yields and more working days, and exports to rise by 5% m-o-m," said CIMB Research in a sector note yesterday.

It added that the September palm oil stocks were above its projections, rising 4% m-o-m to 2 million tonnes by the end of the month, its highest stockpile level since February 2016, driven by lower import numbers.

However, it added that production levels were lower by 2% in September 2017 due to fewer working days in the month.

Meanwhile, HLIB Research said in a sector outlook note today that palm oil inventory levels are to remain elevated in October on the back of seasonally higher production in the month, as well as palm's reduced price competitiveness against the soyoil and the absence of seasonal re-stocking activities.

"Beyond which, we expect stockpile to normalise as seasonally weaker production kicks in from Nov 17 onwards," it added.

It added that exports increased for the seventh month in a row, with increased exports to China and Pakistan.

"[Exports increased] by 1.8% m-o-m to 1.52 million tonnes [on] Sept 17, as higher exports to China and Pakistan (which increased by 41.6% and 87.7% respectively) more than offset lower exports to EU (-38.5%)," it said.

HLIB Research said the catalysts for the sector include weather uncertainties resulting in a distortion of supply of palm oil, which would boost the price of edible oil, as well as slower-than-expected recovery in palm production, leading to sustained higher prices.