Malaysia’s palm oil inventory to fall further as output drops, demand increases

Malaysia’s palm oil inventory will drop further over the next few months after a slight fall in December as severe flooding hits key producing states, analysts said Monday.

‘We believe inventory levels could ease further in the next one to two months even if demand is stagnant as production is expected to decline further,’ said Alvin Tai, analyst at OSK Investment Bank.
Production of palm oil, which includes crude palm oil (CPO) and processed palm oil, dropped 15.4 percent in December while exports grew 9 percent, said the MPOB.

‘CPO production should dip through February and only start to gradually increase from March. At the same time, (overseas) demand should increase in January — ahead of the Lunar New Year,’ said Ben Santoso, a plantation analyst at DBS Vickers Research.

Chinese around the world will celebrate the Lunar New Year on February 7 this year.

China is the largest buyer of Malaysian palm oil after the European Union. In 2007, the world’s most populous country imported 3.84 million tons of palm oil from Malaysia, accounting for about 28 percent of the total.

CPO price will remain strong in 2008 as supply shortfalls in other oilseeds will exacerbate concerns about tight supply, said analysts.

Forbes