Malaysian palm oil inventory as at the end of 2017 was 2.73 million metric tonnes, the highest level since November 2015.
"We believe the temporary suspension of CPO export tax will boost the CPO exports, which will subsequently help ease the pressure on the current high level of CPO inventory. We see 2-2.1m mt to be the comfortable level for inventory," said the research firm.
It noted that CPO exports rebounded from the previous month, driven by the EU, Indian and the US despite weaker demand from China and Pakistan. For 2017, exports grew 3.2% on-year to 16.5 million metric tonnes, due to China and Pakistan.
There has been a gradual decline in production as CPO production slipped 5.6% on-month to 1.42 million metric tonnes in December as oil palm trees enter low production season. For the full-year, production rose 15-% on-year to 19.9 million metric tonnes, slightly below the level seen before the El Nino year.
PublicInvest Research said it has been a slow start for 2018 with Malaysia's CPO exports falling 1.4% on-month in the first 10 days of 2018.
However, CPO exports to China is expected to pick up ahead of the Chinese New Year celebration.
"Average Dec CPO price fell from RM2,654/mt to RM2,405/mt, down 9.4% MoM. For 2017, CPO price climbed 5.2% to RM2,788/mt," the research firm said.
Credit/Source: The Star
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