KUALA LUMPUR: Palm oil stockpiles in world No.2 producer Malaysia likely dipped in May from the month before, driven by robust appetite in key buyers such as India and Pakistan ahead of Islam's holy month of Ramadan, according to a Reuters poll.
A drop in inventories could offer some support to benchmark palm oil prices that have fallen nearly a fifth since the start of the year on expectations of rising output.
The median forecast in the survey of eight planters, traders and analysts showed Malaysia's palm stockpiles at 1.58 million tonnes in May, a 1.3-percent drop from the previous month and the weakest May level since 2010.
Respondents said the decline came as overseas buyers stocked up ahead of the start of Ramadan in late May, when many Muslims break day-long fasts with communal feasting. Palm oil is commonly used as cooking oil or a food ingredient.
Malaysian palm exports in May were seen jumping 13.6 percent from April to their largest in nine months at 1.46 million tonnes.
"Exports in June, however, will taper off after the Ramadan demand," said a trader from Kuala Lumpur. "Stocks are expected to rise as we are also expecting better production by then."
Output in May is forecast at 1.63 million tonnes, up 5.5 percent from April, the survey showed. That would mark the biggest level since October, but the smallest month-on-month growth so far this year.
That climb would also come below the historical May average monthly rise of 5.7 percent over the past five years, and below output levels in May 2015 ahead of an El Nino weather pattern, said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
Palm oil output this year is seen recovering from the effects of a strong El Nino, which damaged crops and reduced yields.
"Plantation companies remain cautious on production prospects for June and are guiding for flat to negative output growth," Ng said, with fewer working days in June and as workers go on leave during Ramadan and Eid al-Fitr, the holiday that marks the end of the fasting period.
The median figures from the Reuters survey imply Malaysian consumption of 253,209 tonnes in May.
Official data will be released by the Malaysian Palm Oil Board after 0430 GMT on June 13.