Malaysian palm oil futures rose on Monday to hover near six-month highs on concerns over tight supplies in the No 2 grower after industry data revealed that end-stocks have dropped to their lowest in five months. Official data from industry regulator the Malaysian Palm Oil Board, released after the midday break, showed that December inventories fell 11.6 percent to 2.01 million tonnes, a bigger drop than the 2.02 million tonnes estimated by the market.
"It's supply driven," said a trader with a foreign commodities firm in Malaysia, referring to the stronger rise in prices in the second session. "From here onwards, stocks will start going down. Looks like it will reach a 1.5 million tonne bottom by March." The benchmark March contract rose 0.6 percent to 2,361 ringgit ($662) per tonne by Monday's close. Total traded volume stood at 42,977 lots of 25 tonnes, above the usual 35,000 lots.
Prices of palm, the world's most traded vegetable oil, last week raced to their highest since July, fuelled by worries that more monsoon rainstorms across Malaysia would trigger flooding and further dent crude palm oil production, squeezing stocks. After issuing warnings for bad weather over several palm-growing states in the country, Malaysia's meteorological office on Monday terminated its "yellow stage" advisory for heavy rains over Pahang, Johor and Sarawak.
"The market has no clear direction whether the floods will have a strong impact on production again this month," said a second trader with a foreign commodities brokerage in Kuala Lumpur. "It's a bit uncertain at this level," the trader said, adding that prices will likely be rangebound between 2,340-2,380 ringgit in Monday trade. Exports of Malaysian palm oil products between January 1 and January 10 fell 12.7 percent to 355,846 tonnes shipped, cargo surveyor Intertek Testing Services said on Monday, as demand from top edible oil buyers India and China waned.
Another cargo surveyor Societe Generale de Surveillance showed exports for the same period fell 19 percent. In other markets, oil prices renewed their declines on Monday, dropping below $49 a barrel as Goldman Sachs slashed its short-term forecasts and Gulf producers showed no signs of cutting production. In competing vegetable oil markets, the US soyoil contract for March rose 0.7 percent in late Asian trade, while the most active May soybean oil contract on the Dalian Commodity Exchange shed 0.1 percent.