Malaysia palm oil stocks seen rising on robust production

KUALA LUMPUR: Malaysian palm oil stocks likely rose for a second month in August, inching towards the 2-million tonne mark as output in the world's second-largest producer of the commodity remains near its strongest in two years, a Reuters poll showed.

Climbing inventories could drag on markets for the tropical oil, used to make products ranging from cooking oil to soap and shampoo. Benchmark prices have been gradually rising over the last couple of months, lying at around 2,760 ringgit ($650) a tonne on Wednesday.

Palm oil stocks at the end of August stood at 1.9 million tonnes, up 6.5 percent from the previous month, according to the median response of seven traders, planters and analysts surveyed by Reuters. That would mark their highest level since March 2016.

The increase comes as August palm oil production is seen remaining robust, with the survey showing it may have eased 1.4 percent from July to 1.8 million tonnes.

Market participants have been looking for output to breach 2 million tonnes for the first time since October 2015, with analysts saying more gains could be on the cards.

"There should be continued production pick-up from July due to the seasonal pattern (despite August's slight drop)," said Voon Yee Ping, an analyst with Kenanga Research.

Production in Malaysia has been steadily clawing back after it was hit by a crop-damaging El Nino in 2015, although analysts and planters said trees were still seeing some lingering effects from the weather pattern.

The survey also indicated that August exports rose 1.6 percent from July to 1.42 million tonnes.

Meanwhile, demand for palm oil is being supported ahead of major festivals in top consumers India and China the following month.

"We estimate crude palm oil price competitiveness versus other edible oils will have driven the steady palm oil demand in August," said William Simadiputra, a Jakarta-based analyst with DBS Vickers Securities.

The median figures from the Reuters survey imply Malaysian consumption of 347,458 tonnes in August.