January stocks in Malaysia <MYPOMS-TPO>, the world's second-largest palm oil producer and exporter, declined for the first time in eight months, falling 6.7 percent to 3.001 million tonnes, data from the Malaysian Palm Oil Board (MPOB) showed.
December's mark at 3.22 million tonnes was the highest ever in data going back 20 years.
Declines in the stockpiles could help boost benchmark palm oil prices, which have already edged up in January and February from three-year lows touched at end-2018.
Palm oil was down 0.7 percent at 2,274 ringgit ($558.70) a tonne at the midday break on Monday. The inventory decline was attributed to a sharper-than-expected jump in exports, said traders.
The MPOB data showed exports <MYPOME-PO> jumping to 1.68 million tonnes in January, up 21.2 percent from December. The levels are their strongest since August 2016.
"Major destination markets picked up the pace in demand. For example, China demand rose ahead of the Lunar New Year. Demand also rose on cheaper prices," said a Kuala Lumpur-based trader.
He said the strong demand trend is unlikely to continue in February given the ringgit's strength.
The ringgit, palm's currency of trade, has gained 0.6 percent against the dollar since the start of the month, making palm oil more expensive for holders of foreign currencies.
Palm output in January <MYPOMP-CPOTT>, meanwhile, eased 3.9 percent to 1.74 million tonnes from the previous month, falling a third straight month to its lowest since August, although dropping at a slower pace than forecast.
Production of palm oil, used in a variety of consumer goods items from cooking oil to soap and lipstick, typically declines in the first quarter of the year.
"Production is not falling as per the expected pace," said Anilkumar Bagani, research head for commodities at Mumbai-based broker Sunvin Group.
"Producers were delaying production for the last two months when prices were on the decline, but then started to produce more as prices recovered," he said.
A Reuters survey had forecast palm oil's end-January stockpiles to fall 4.7 percent to 3.07 million tonnes, while production was forecast to fall 10.9 percent to 1.61 million tonnes. Exports were forecast to gain 12.4 percent to 1.56 million tonnes.