Palm oil stockpiles in Malaysia, the second-largest supplier after Indonesia, slumped below 2 million tons in March for the first time in seven months as production fell from a year earlier. Futures climbed.
Inventories (PASTTOTL) tumbled 5 percent to 1.96 million tons from 2.06 million tons in February, the Malaysian Palm Oil Board said in a statement today. That was less than the 2.01 million tons predicted in a Bloomberg survey last week. Output (PALPCPO) increased 2.1 percent to 1.21 million tons from 1.19 million tons in February, and was 14 percent less than a year earlier. Exports (PAEXCPO) rose 10.8 percent to 1.34 million tons, it said.
Futures surged on concern that lower inventories may pare global cooking-oil supplies as a drought cuts soybean production in South America. Soybeans can be crushed to make soybean oil, a substitute used in everything from candy to fuel.
The supply problem is “very disturbing,” Ben Santoso, an analyst with DBS Vickers Securities (Singapore) Pte., said by phone. “We will need to reassess the supply for the whole year from Malaysia, and this will have an impact on the stock-to- usage ratio going forward.”
The drop in March output from a year ago suggested some form of tree stress, said Santoso. Production usually recovers in March after the seasonally low output months of January and February.
The June-delivery contract advanced as much as 1.2 percent to 3,619 ringgit ($1,176) a ton on the Malaysia Derivatives Exchange and was at 3,610 ringgit at 4:09 p.m. in Kuala Lumpur. Futures, up 14 percent this year, reached 3,623 ringgit yesterday, the highest price since March 8, 2011.
“The price strength is justified and it will probably stay strong for quite some time,” said Santoso. “Prices are supported by supply and demand. Apart from declining crude prices, there is really not that much downside.”
Oil traded near the lowest price in almost a week in New York on speculation U.S. crude stockpiles rose to the highest level for this time of year since 1990. The May-delivery contract was at $102.33 a barrel, down 13 cents, in electronic trading on the New York Mercantile Exchange.
Palm oil exports from Malaysia increased 7.8 percent to 478,948 tons in the first 10 days of April from the same period a month earlier, surveyor Intertek said today.
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