Wedoany.com Report-Mar 10, Malaysia's palm oil stocks fell for a fifth month in February to their lowest in 22 months as production declined, outweighing a reduction in exports, data from the industry regulator showed on Monday.

Fresh fruit bunches of oil palm tree are are seen inside a wheelbarrow at a palm oil plantation in Kuala Selangor, Selangor, Malaysia April 26, 2022.

The drop in stocks in the world's second-largest palm oil producer after Indonesia could support benchmark futures , traders said, even as the tropical oil's premium over soyoil reduces demand from price-sensitive importing countries.

Malaysia's palm oil stocks at the end of February fell 4.31% from the previous month to 1.51 million metric tons, the lowest level since April 2023, according to the Malaysian Palm Oil Board, or MPOB.

Crude palm oil production in February fell 4.16% to 1.19 million tons, the lowest level in three years, after floods disrupted production. Palm oil exports fell 16.27% to hit 4-year low of 1 million tons, it said.

A survey had forecast inventories at 1.48 million tons, with output seen at 1.16 million tons and exports at 1.05 million tons. 

Malaysia’s palm oil inventories fell in February to their lowest level in nearly two years due to production disruptions caused by the floods in the country.

While stocks were slightly higher than market expectations, the ongoing supply tightness caused by lower output is likely to support prices, said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group.

In March, Malaysian production is likely to improve, but exports are unlikely to improve significantly as palm oil still holds a premium over soyoil, said a Mumbai-based dealer with a global trade house.

"Indian demand will be crucial in the coming weeks to support prices. Early indications suggest India is buying more to replenish stock," the trader said.

Stagnating production and a biodiesel push in top producer Indonesia could buoy prices of cooking oil for years, factors that make traditionally cheap palm oil costlier and eliminate an advantage that also curbed prices of rival oils.