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Kuala Lumpur: Malaysia’s palm oil stocks hit a four-month low at the end of December as production slumped to its lowest level in six months, offsetting a slowdown in exports.

The reduction in stocks at the world’s second-largest palm oil producer after Indonesia would help in supporting benchmark futures, which lost 10% in 2023.

Inventories fell 4.64% month-on-month to 2.29 million metric tonnes, the lowest since August, data from the Malaysian Palm Oil

Board (MPOB) showed on Wednesday.

Crude palm oil production in December plunged 13.31% to 1.55 million tonnes from the prior month, while palm oil exports declined 5.12% to 1.33 million tonnes, MPOB said.

A Reuters survey had forecast December’s inventories at 2.37 million tonnes, a 2.28% decline from the previous month, with output at 1.6 million tonnes and exports at 1.34 million tonnes.

“The data aligns with market expectations. The market has already factored in the reduction in stocks, which is why futures have been rising over the past two days,” said a Mumbai-based trader.

“The reduction in production was somewhat surprising. If this trend continues into January, we could witness an even larger drop in production and stocks during that month,” he added.

The focus will now be on January’s export performance, while production for the month is expected to decline further, said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.