KUALA LUMPUR, March 11 (Xinhua) -- Malaysia's palm oil inventories fell in February as production eased, with analysts expecting stock levels to continue declining amid improving exports, although the escalating Middle East conflict could introduce fresh risks to demand and costs.
Data from the Malaysian Palm Oil Board showed Tuesday that Malaysia, the world's second-largest palm oil producer, saw inventories drop 3.9 percent month on month to 2.7 million tonnes, largely due to lower output.
In a note, RHB Investment Bank said Malaysia's palm oil production is likely to continue moderating while exports should pick up as crude palm oil becomes more competitive against soybean oil, which could further reduce stock levels.
However, the research house warned that the Middle East conflict could have mixed implications for the sector. Disruptions to shipping routes near the conflict zone could affect key importers, including Pakistan, Egypt, Saudi Arabia, Türkiye, the United Arab Emirates and Iran, potentially impacting up to 15 percent of global palm oil demand.
At the same time, the conflict could push up fertilizer and logistics costs if tensions disrupt flows through the Strait of Hormuz, a critical global shipping route for energy and food supplies.
Meanwhile, MBSB Research expects crude palm oil prices to rise about 3.3 percent month on month in March to an average of 4,212 ringgit (about 1,073 U.S. dollars) per tonne, supported by seasonally softer output and firmer crude oil prices amid geopolitical tensions.
Separately, Hong Leong Investment Bank Research said in a note that it believes stronger exports, supported by restocking activities ahead of the Ramadan period and palm's widened price discount against soybean oil, will be offset by an expected seasonal rebound in palm oil output. ■