Malaysian Palm Oil Inventories Plummet Due to Exports Surpass Supply

Kuala Lumpur: As exports soared in advance of Ramadan, it has been projected that Malaysia's Palm Oil inventories at the end of March remained at their lowest level in eight months, at below 1.9 MT. Inventories in Malaysia, the second-largest producer in the world, fell 16.2% from February to 1.76 MT, the lowest level since July 2022, according to the consensus estimate of traders of Palm Oil.

A low base was observed in February when consumers moved to Indonesian Palm Oil in anticipation of changes to the country's export policy, and the exports spiked earlier than expected. Additionally, Palm Oil shipments from Indonesia declined precipitously in the previous month, especially in March, and the same demand for the product was switched back to Malaysia. However, demand is now expected to remain strong due to increased import margins, a better price for edible oil, and the restocking of Palm Oil for Eid.

The production, which had been falling during the previous four months, increased by almost 1.9% to 1.27 MT in March 2023. Exports increased by 24.9% to 1.29 MT as demand switched to Malaysia after leading exporter Indonesia implemented some export restrictions to safeguard the domestic supply of Palm Oil.

Palm Oil stocks in Malaysia decreased by more than 20% by the end of March compared to the previous month, far below market forecasts as exports skyrocketed while production ascended at a slower pace. Exports surged to 1.386 MT in March, up 30% from the previous month and exceeding market forecasts of 1.225 MT. Crude Palm Oil production increased to 1.188 MT in March 2023, up 2.7% from February but less than the 1.311 MT output in March 2022.

As per the ChemAnalyst database, the price of Palm Oil is anticipated to increase in the upcoming months. Considering the massive reduction in inventory and the high demand, the market is expected to rise.