KUALA LUMPUR, Jan 5 — Malaysian palm oil stockpiles are expected to have climbed to their highest in more than two years at end-December, according to a Reuters poll, as production levels outstripped exports, even though output fell versus November.

Inventories are forecast to grow by 5.1 per cent on the month to 2.69 million tonnes, the highest level since November 2015 and a sixth straight month of gains, based on a median of eight planters, traders and analysts polled by Reuters.

Palm oil, a ubiquitous vegetable oil used in the making of everything from cooking oil and soap to biodiesel, could see its prices come under pressure from rising stockpiles.

Benchmark palm oil prices already hit a 16-month low in mid-December and shed nearly 20 per cent in 2017.

Prices opened 0.4 per cent higher at RM2,595 (US$648.75) today morning. Output in December is seen falling to 1.82 million tonnes, down 6.6 per cent from November, and its sharpest monthly decline in six months. But that would still represent the highest December level since at least 2000.

The decline is attributed to disruption in harvests due to year-end rains, and is in line with seasonal trends, according to contributors to the poll. The year-end monsoon season typically brings heavy rains and floods across the region, disrupting the harvest process and lowering output.

"Production will likely weaken further on wetter weather expectations, but so far there are no reports of serious production impacts,” said Voon Yee Ping, an analyst at Kenanga Research in Kuala Lumpur.

"January is also likely to see lower production, as the monsoon (season) tends to carry over from end-December to mid-January,” the analyst said. Meanwhile, the survey showed Malaysia’s December exports are likely to have gained 7.8 per cent on the month to 1.46 million tonnes, as key buyers such as India and Europe restocked.

"December demand is quite good, cargo surveyors had also reported 6-9 per cent export gains, we saw India stocking up,” said one Kuala Lumpur-based trader, who declined to be identified because he was not authorised to speak to the media.

"They could be buying more now as winter is ending in January.”

The Lunar New Year in February is also expected to support demand for the tropical oil from China, the survey’s respondents said, as it brings higher usage of palm oil for cooking purposes.

Official data will be released by the Malaysian Palm Oil Board after 0430 GMT on January 10. The median figures from the Reuters survey imply Malaysian consumption of 255,073 tonnes in December.  — Reuters