Palm oil inventories in Malaysia likely climbed to their biggest in nearly three years after rising production in the world's second-largest grower outpaced a recovery in export demand.
Stockpiles jumped about 8% in September from a month earlier to 2.26 million tons, according to the median of 10 estimates in a Bloomberg survey of analysts, traders and plantation executives. That would be the fourth straight monthly increase, lifting reserves to their highest since October 2019.
Bulging inventories and accelerating production have overshadowed robust shipments from Malaysia, spurring the worst quarterly slump in prices since 2008 and providing some relief for world food inflation.
Mounting concerns that a global recession will curb edible oil demand are also pressuring futures, even as the weak ringgit makes the oil more attractive to price-sensitive buyers.
Malaysia's production rose about 2.3% in September to a two-year high of 1.77 million tons, the survey showed, slowing from a 10% increase in August. Exports were seen jumping 7.7% to 1.40 million tons, the strongest since December.
Palm oil will remain volatile, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.
"Rising supplies and macro headwinds are stacked against favorable export conditions of low cash offers, palm's wide discount to rival vegetable oils, the weak ringgit and declining freight rates," he said. Prices may swing between 3,300 ringgit ($710) and 3,700 ringgit a ton in October. Futures for December delivery traded at 3,596 ringgit on Tuesday.