Petaling Jaya – Malaysian palm oil stocks continued their downward trend in February 2024, dropping by 5.00% to 1.919 million tonnes. This marks the lowest level of stock registered since July 2023. The reduction in palm oil inventory in February primarily driven by reduced imports and robust domestic consumption.

In the first two months of 2024, Malaysian palm oil imports experienced a 70% decrease year-on-year, plummeting to 0.062 million tonnes. This amount accounts for merely 6.90% of total imports in 2023. Historically, Malaysian palm oil inventory has heavily relied on imports for built-up. Therefore, closely monitoring the upcoming month’s import figures is crucial to gauge palm oil stocks level in Malaysia.

Another significant factor contributing to the decline in stocks is the strong domestic consumption. Malaysian palm oil domestic consumption in January and February 2024 grew 11.30% as compared to the same period in 2023. It is unlikely that Malaysia’s palm oil stocks will experience any growth in March due to robust domestic consumption, particularly during the Ramadan month. Additionally, production is not expected to increase until April and beyond.

On 15 March 2024, CPO prices have surged to their highest level in 12 months, nearly 10% above the February closing price. The strong price trends observed in first quarter of 2024 is predominantly shaped by the deficit supply growth dynamic.

As the low season for palm oil production concludes in March, palm oil prices may begin to reflect the recovery in production and inventory levels in April and May, potentially capping palm oil prices. Additionally, the price premium of palm oil over soft oils continued to widen in March and have surpassed the prices of three major soft oils concurrently since February in the European market.

The announcement by GAPKI regarding Indonesia’s palm oil inventory of 3.14 million tonnes as of December 2023 further indicates tight palm oil supply. Therefore, it is predicted that palm oil stocks of Malaysia and Indonesia combined will be less than 5 million tonnes in February 2024. In 2024, Global palm oil production is projected to rise minimally by 0.11%, whereas production growth for soybean oil, rapeseed oil, and sunflower oil is expected to increase by 2.88%, 3.48%, and 3.94%, respectively.

Palm oil prices are anticipated to pull back to the trading range of RM3,800 to RM4,000 in April. A bullish price movement from the current level of RM4,250 is unlikely due to the ample supply of soybeans from South America entering the global market from April onwards, as well as the gradual seasonal recovery of palm oil production in Malaysia. Palm oil prices were trading at a premium of USD40 to USD95 above soft oils in March. Therefore, a recovery in soft oil prices is anticipated in April to narrow the price spread.