05 June 2018
Malaysia Palm Oil Reserves Seen at 8-Month Low on Weak Output
Malaysia Palm Oil Reserves Seen at 8-Month Low on Weak Output

Tuesday, June 5, 2018 10:11 AM 

By Anuradha Raghu

*May stockpiles seen 1.8% lower, output down 3.8%, survey shows
*Output may continue to drop in June on Eid holidays: Cultrera

(Bloomberg) --

Palm oil stockpiles in Malaysia, the world’s second-largest producer, likely fell for a fifth month to the lowest since September.

Stockpiles dropped 1.8 percent to 2.13 million metric tons in May from a month earlier, according to the median estimate of nine planters, traders and analysts surveyed by Bloomberg. That would mark the longest run of monthly declines since May 2016. Productionfell 3.8 percent month on month and 9.1 percent year on year to 1.5 million tons, according to the survey. Exports slipped 12 percent to 1.35 million tons. The Malaysian Palm Oil Board will release official data on June 11.

A key item to watch is production, according to Alan Lim, plantations analyst at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. The decline in year-on-year output in May would be the first since June last year and "this may be a positive factor on crude palm oil prices that the market has not fully priced in," he said. "The recovery of production from El Nino may have ended."

Prices rose 2.8 percent in May in the first monthly rise since February, buoyed by a rally in crude oil prices and losses in the Malaysian ringgit, the currency where the benchmark is traded. Gains were capped by sluggish demand and investor caution after the Malaysian opposition’s surprise election victory on May 10.

Palm oil for August delivery on Bursa Malaysia Derivatives fell 1.2 percent to close at 2,409 ringgit ($607) a ton in Kuala Lumpur on Monday, taking its loss for the year to 3.8 percent.

Eid Festival, Demand

Prices may be supported between 2,350 ringgit and 2,450 ringgit in the near term, with output expected to drop in June or remain little changed due to holidays, according to Marcello Cultrera, institutional sales manager at Okachi Malaysia Sdn. in Kuala Lumpur. Ramadan began in mid-May and will be followed by Eid al-Fitr celebrations on June 14. The events are observed in Muslim-majority Indonesia and Malaysia and plantation workers typically go on holiday for the festivities. In July, there may be a big production recovery as workers return, Cultrera said.

Meanwhile, the "concern over lackluster demand is seriously undermining the market", said Sathia Varqa, owner of Palm Oil Analytics in Singapore. Cargo surveyor SGS Malaysia Sdn.reported Malaysian exports dropped almost 10 percent in May from April, with weaker shipments to India and Europe.

Malaysia’s imports were forecast at 40,000 tons in May compared with 35,624 tons a month ago. Estimates for domestic consumption ranged between 190,000 tons and 250,000 tons.

        May 2018  April 18  May 17
Output       1.50    1.56      1.65
Stockpiles 2.13    2.17      1.56
Exports.     1.35    1.54      1.51
Imports.     0.04    0.04      0.05

NOTE: Figures in million metric tons, based on the median of 9 estimates.


Okachi (Malaysia) Sdn. Bhd.

Level 8, Pavilion KL,
168, Jalan Bukit Bintang,
55100 Kuala Lumpur.

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