KUALA LUMPUR: Malaysian palm oil stocks fell to less than 3 million tonnes by end-March to their lowest in five months, as a surge in demand outpaced production gains, official data showed on Wednesday. 

Inventories in Malaysia, the world’s second-largest palm oil producer and exporter, declined 4.6 percent to 2.92 million tonnes (MYPOMS-TPO), the first time since October 2018 that stocks were less than 3 million tonnes, data from the Malaysian Palm Oil Board (MPOB) showed. 

The fall in end-stocks could support benchmark palm oil prices, which have gained more than 5 percent so far this month. Palm oil was last up 0.1 percent at 2,214 ringgit ($540.66) a tonne at Wednesday’s midday break. 

Strong exports have also been supportive of palm prices, with the MPOB data showing a 22.4 percent jump in March from the previous month to 1.62 million tonnes. 

The export gains (MYPOME-PO) on a monthly basis are the strongest in six months. 

Low prices and the Muslim fasting month of Ramadan have prompted restocking activities by buyers, said a Kuala Lumpur-based trader. 

“Exports were quite good due to Indian buying. This and next month (are) summer in India, when they tend to buy more. Some exports were also due to Ramadan,” the trader said. 

Ramadan, the Muslim fasting month that begins in early May this year, sees devotees break day-long fasts with communal feasting, increasing palm oil usage for food and cooking.

Importers typically stock up on the edible oil one to two months ahead of the festival. 

The MPOB data also showed that output in March rose to 1.67 million tonnes, up 8.3 percent from February and registering its first gain after four months of decline. 

The output, however, is at the highest for March in Malaysia, according to Refinitiv Eikon records going back to January 2000. 

“Production came in higher than expected ... It could be due to a lower harvesting cycle in February,” said another Kuala Lumpur-based trader, explaining that public holidays in February could have delayed some harvesting activities to March. 

A Reuters survey had forecast palm oil’s end-March stockpiles to fall 6.4 percent to 2.85 million tonnes, while production was forecast to rise 6.8 percent to 1.65 million tonnes. Exports were expected to gain 23.4 percent to 1.63 million tonnes. 

The following is a breakdown of the Malaysian Palm Oil Board figures and Reuters estimates for March: 

(volumes in tonnes)