KUALA LUMPUR: Malaysian palm oil futures ended over 3% lower on Friday, dragged by unexpectedly high February end-stocks, but clocked a third weekly rise as global supply tightens.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange closed 251 ringgit lower, or 3.61%, to 6,710 ringgit ($1,600.67) a tonne.

For the week, palm is up 6.92%.

Malaysia’s end-February inventories fell less than anticipated, down 2% from the previous month to 1.52 million tonnes, the Malaysian Palm Oil Board (MPOB) said on Thursday.

Palm eases after rally led by Indonesia export curb; MPOB data in focus

Exports, which were pegged to climb, fell 5% to 1.1 million tonnes.

This may be early signs of demand rationing in some markets due to the sharp rise in prices recently, said Ivy Ng, regional head of plantations research at CGS-CIMB Research, said in a note.

The contract has already surged nearly 43% so far this year to unprecedented highs.

Nevertheless, Malaysian palm oil has gained an export advantage as buyers seek replacements for Black Sea sunflower oil disrupted by the Russia-Ukraine war and as Indonesia expands a policy requiring exporters to sell 30% of their products domestically.

Crude palm oil prices will stay volatile due to uncertainties from the invasion, Indonesia’s restrictions, and government polices on biodiesel mandates, Ng said.

In bigger producer Indonesia, end-January stocks rose to 4.68 million tonnes from 4.13 million tonnes a month earlier, while exports slumped 23.8% to 2.18 million tonnes, the Indonesian Palm Oil Association (GAPKI) said.

Dalian’s most-active soyoil contract fell 1.5%, while its palm oil contract gained 0.5%. Soyoil prices on the Chicago Board of Trade were down 1.7%.