Palm Oil Gains to One-Month High as Inventories Seen Declining

Palm oil climbed to the highest level in a month on speculation that stockpiles in Malaysia, the world’s biggest producer after Indonesia, may decline as output drops and exports increase.

The contract for delivery in June advanced 1.6 percent to 2,494 ringgit ($801) a metric ton on the Malaysia Derivatives Exchange, the highest price at close for the most-active contract since Feb. 22. Futures gained 3.3 percent this week.

Palm oil may trade between 2,400 ringgit and 2,700 ringgit through May as the Malaysian currency weakens before elections and inventories drop among the top producers, Dorab Mistry, director at Godrej International Ltd., said today. Inventories in Malaysia dropped to 2.44 million tons in February from an all-time high of 2.63 million tons in December, according to the nation’s palm oil board. Production slumped 19 percent to 1.3 million tons last month, board data show.

“If production is lower in March, it will be the sixth month of continuous decline,” Chandran Sinnasamy, head of trading at LT International Futures Sdn., said by phone from Kuala Lumpur. “This will bring down the stocks sharply in the next one to two months.”

The gains in exports will also contribute to the decline in inventories, Chandran said. Exports from Malaysia rose 14 percent to 922,987 tons in the first 20 days of this month from February, Societe Generale de Surveillance said March 20.

Soybean oil for May delivery was little changed at 50.47 cents a pound on the Chicago Board of Trade, while soybeans for May fell 0.3 percent to $14.45 a bushel.

Refined palm oil for September delivery dropped 0.4 percent to close at 6,386 yuan ($1,028) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month lost 0.8 percent to end at 8,082 yuan a ton.

Before it's here, it's on the Bloomberg Terminal.