KUALA LUMPUR: Malaysia’s stocks of palm oil jumped in August to their highest in six months, as monthly production reached a nine-year high amid a slowdown in exports, the industry regulator said on Tuesday. The rise in stocks in Malaysia, the world’s second-largest producer of palm oil after neighboring Indonesia, could weigh on benchmark futures already hovering near their lowest in seven months. Malaysia’s palm oil stocks at the end of August rose 7.34 percent from the previous month to 1.88 million metric tons, the highest level since February, the Malaysian Palm Oil Board (MPOB) said.

Crude palm oil production gained 2.87 percent in August from July to 1.89 million tons, the highest since October, data from the industry regulator showed on Tuesday. Production for the month was the highest since 2015. Palm oil exports in the month fell 9.74 percent to 1.53 million tons, the MPOB said.

A Reuters survey had forecast inventories at 1.86 million tons, with output seen at 1.89 million tons and exports at 1.5 million tons. The MPOB data is neutral for palm oil, as the stock levels have increased within the anticipated range and are lower than those of the previous year, said Anilkumar Bagani, the research head of Mumbai-based Sunvin Group.

Production in September is also likely to stay on the higher side, but there is no sign yet of an uptick in demand from key markets such as India and China, which could squeeze prices, said a Mumbai-based trader. Exports of Malaysian palm oil products for September 1 to 10 fell 5.2 percent to 412,771 tons, independent inspection company AmSpec Agri Malaysia said on Tuesday.

The market is closely monitoring Indonesia’s biodiesel policy and potential changes in its duty structure, which will determine price movements in coming months, the trader said. Indonesia plans to lower export levy rates of the tropical oil to boost competitiveness against rival vegetable oils and raise farmers’ income. — Reuters