MPOB Preview: End-Dec stocks to hover near 2 million mt mark

Analysts are expecting Malaysia’s end-December palm oil stock levels to fall further from the previous month and nearer to 2 million mt, after stocks dipped for the first time since May, according to surveys conducted by two news agencies ahead of the Malaysian Palm Oil Board (MPOB)'s December palm oil data release next week.

Industry surveys undertaken by news agencies Bloomberg and Reuters pegged month-on-month falls of between 4.4-5.3% in the end-December stock levels to 2.168-2.19 million mt.

Other estimates from analysts at CIMB and Kenanga Research put stockpile levels lower at 1.978 million mt and 1.967 million mt respectively, or 13.6-14% lower on the month.  

The surveys also pegged December production at around 3% lower to 1.63 million mt, while other production estimates by the Malaysian Palm Oil Association (MPOA) moved output for December slightly lower to 1.61 million mt.

Malaysian palm oil stocks had hit a 36-month high of 2.4 million mt back in October and have subsequently started to taper amid lower output and steady demand from key export markets.

December exports were also pegged at 1-2% lower against November at 1.49-1.5 million mt in the surveys, while earlier export estimates by cargo surveyors placed December exports at 1.46-1.55 million mt.

A drop also would mark the first monthly decline in exports since August, with Malaysia having seen healthy export levels between September to November as palm oil remained attractively priced against other rival vegetable oils.

Should the end-December stock levels touch around 2 million mt eventually, they would still place higher compared with 2020 and 2021, where end-December stockpiles stood at 1.27 million mt and 1.61 million mt respectively.

Palm oil supply in the first quarter of the year is expected to tighten due to seasonally lower production as well as reduced availability from Indonesia after the government lowered its domestic market obligation (DMO) export quota, effectively trimming the volume of exports allowed to flow out.

Indonesia is also expected to increase its palm oil consumption to support its B35 biodiesel blending mandate, which takes effect from February 1.

Market participants are also watching for indications of demand recovery from China which would add further strength to prices, though worries remain over the country's continued battle against surging Covid cases.

MPOB is expected to release the official supply and demand data on January 10.