SINGAPORE: Malaysian palm oil dropped on Wednesday over expectations of a rise in stockpiles, with COVID-19 restrictions in top buyer China further dragging down the market.

The benchmark palm oil contract for January on the Bursa Malaysia Derivatives Exchange fell for a second straight session, falling 165 ringgit, or 3.78%, to 4,196 ringgit ($895.05) a tonne, its lowest closing since Oct. 31.

“Prices are down ahead of Malaysian Palm Oil Board data (which is) expected to show higher stocks in Malaysia,” said Pranav Bajoria, a director at Singapore-based brokerage Comglobal.

China’s commitment to continue its “zero COVID-19” policy also weighed on prices, Bajoria added.

Malaysia’s palm oil inventories at end-October likely rose to a three-and-a-half-year high as production improved while imports slumped, a Reuters survey showed.

Stockpiles were pegged to rise 9.3% from September to 2.53 million tonnes, the most since April 2019, according to the median estimate of eight traders and analysts polled by Reuters.

Palm oil falls 1.6% on Chinese demand concerns

The global outlook for palm oil remains uncertain, with strict pandemic policies in China weighing on demand, while high energy prices and a slowdown in output propping it up, leading industry analysts said at a conference on Friday.

Nearly three years into the pandemic, China is sticking with its strict COVID containment policy that has caused mounting economic damage and widespread frustration, while keeping its borders shut for most international travel.

In related edible oils, Dalian’s most-active soyoil contract lost 2.4%, while its palm oil contract gave up 1.8%.