KUALA LUMPUR (Feb 10): Palm oil inventories in Malaysia fell to their lowest levels in five months at the end of January, depleted by a fall in output and the first rise in exports in five months, but still remained higher than industry forecasts.

January stockpiles fell 7.6% to 1.54 million tonnes, the first month-on-month decline since August, data from industry regulator the Malaysian Palm Oil Board (MPOB) showed on Friday.

Still, the fall was weaker than a 10.7% drop to 1.49 million tonnes, according to forecasts from a Reuters survey.

Expectations of declining stocks have supported the benchmark palm oil price, which hit a more than two-week high in early trade on Friday and was in line for a
fourth consecutive session of gains. Palm was up 1.1% at 3,132 ringgit (US$704.77) per tonne at the midday break. 

Palm is trading at over four-year highs, due to the lingering effects of a crop damaging El Nino weather phenomenon on output.

Production in January fell a stronger-than-expected 1.28 million tonnes, down 13.4% from December, dropping to its lowest levels since March. It was the sharpest drop in a year.

"There were fewer working days in January due to the Chinese New Year holidays, and also floods in some part of the country, so these two events impacted the evacuation of fruits," said Ivy Ng, regional head of plantations research at CIMB Investment Bank.

"But stocks did not fall as much as expected, perhaps due to less local consumption. This will be slightly negative for prices, but I don't think they will come off substantially, because stocks are still at a five-month low."

Palm oil shipments in January rose 1.2% from December to 1.28 million tonnes. Exports from Malaysia, the world's second largest palm producer after Indonesia, had previously fallen for four consecutive months. 

"The slight gain in exports shows only lukewarm demand.

Soyoil is more competitive now, if you look at the spread," said a futures trader from Kuala Lumpur, referring to soyoil's premium above palm.

"We have to look at India for future exports. They could be restocking, as they haven't been buying due to their monetary issue."

Palm oil demand from India, the world's largest palm oil consumer, slipped at the end of last year as a removal of high value rupee notes from circulation disrupted trade.

The Reuters poll forecast output to fall 9.1% to 1.34 million tonnes, and for exports to rise 1% to 1.29 million tonnes.

The following is a breakdown of Malaysian Palm Oil Board figures and Reuters estimates for January:

(volumes in tonnes)

 *denotes revised figures            
(US$1 = 4.4440 ringgit)