Malaysia's end-April palm stocks fall to seven-month low

Malaysia's palm oil inventories fell to a seven-month low at end-April, declining for a fourth straight month as exports and domestic consumption outpaced production, official data showed on Thursday. End-stocks in Malaysia, the world's second largest palm oil producer, fell 6.4 percent to 2.17 million tonnes, the lowest level since September, the Malaysian Palm Oil Board (MPOB) reported.
Lower inventories could shore up benchmark palm oil prices, which hit a 21-month low last week. Palm prices have since edged higher, but ended down 0.1 percent at 2,381 ringgit ($603.09) a tonne on Tuesday. Malaysia's national stock exchange was closed on Wednesday for national elections. It will remain closed through Friday due to the announcement of special public holidays after Malaysia's opposition alliance won power in a shock victory.
"It looks like there's higher biofuel demand last month. That explains the lower stocks level in the country," said David Ng, derivatives specialist at Phillip Futures in Kuala Lumpur. Higher biofuel demand increases palm oil consumption. "Overall we reckon the production pace has not been picking up yet and stocks were mainly lower due to a sustained export pace." Rising oil prices in recent weeks have made production of biodiesel, in which crude palm oil is used as feedstock, more economical. Gasoil's price spread over palm recently widened to its highest in over three years, and was last around $75 on Thursday.
The MPOB data showed April output dipped 1 percent to 1.56 million tonnes from a month earlier, but was still the highest April level since 2015. Exports slid 1.6 percent on-month to 1.54 million tonnes in April, but were still above market expectations. "Exports came in better than expected, it could be because of the duty exemption in April," said a palm oil futures trader in Kuala Lumpur, referring to Malaysia's export tax exemption on crude palm oil for four months.
Malaysia had extended a tax exemption on crude palm oil from January to April to cut inventories and support prices. A Thomson Reuters survey had forecast palm oil stockpiles to fall 4.1 percent to 2.23 million tonnes in April. Production was seen flat at 1.57 million tonnes, while exports were forecast to fall 5.5 percent to 1.48 million tonnes.