Malaysia Palm Oil Exports Reach Record, Paring Stocks

Jan. 12 (Bloomberg) -- Palm oil stockpiles in Malaysia, the world’s second-largest producer of the tropical oil, declined in December from a record as exports climbed to the highest ever.

Inventory fell 12 percent to 1.99 million metric tons, the Malaysian Palm Oil Board said today. Production slid 11 percent to 1.48 million tons, easing from November’s record. Exports rose to 1.61 million tons.

Lower stockpiles may help sustain three weeks of gains in prices of palm oil, its longest run since May 23. The commodity fell 53 percent in the second half of last year, after rising to a record in March, as production exceeded demand.

“The inventory level has peaked,” said Ben Santoso, an analyst at DBS Vickers Securities in Singapore. “This signals the price recovery is justified.”

March-delivery palm oil advanced as much as 4.1 percent to 1,998 ringgit ($559) a ton on the Malaysia Derivatives Exchange, and was at 1,968 ringgit at 3:05 p.m. The stockpile and output numbers were announced after trading halted for a midday break.

Both Indonesia and Malaysia, who control 90 percent of world production, reported record output last year.

“We expect inventory to drop to 1.9 million tons by year- end due to a combination of a recovery in exports and peaking production,” Gan Huey Ling, an analyst at AMResearch Sdn. in Kuala Lumpur, said in a report before the data was released.

Palm oil may average 2,000 ringgit a ton in 2009, 18 percent higher than previously forecast, Gan said. That compares with an average 2,852 ringgit in 2008.

“Inventory level will be flat” from here on, Santoso said. “Although production is coming down, there’s not much buying and no festivities ahead to spur demand.” The rally may cap at 2,000 ringgit, he said.

Palm oil is the world’s most consumed cooking oil, followed by soybean oil. Soybean oil traded in Chicago gained 0.8 percent to 37.01 cents a pound at 3:10 p.m. Singapore time in after-hours trading, making it 48 percent more expensive than palm oil.