KUALA LUMPUR/MUMBAI (June 10): Malaysia's palm oil stocks rose marginally to a three-month high in May, as strong exports were offset by a rebound in production, the industry regulator said on Monday.

Malaysia's palm oil stocks rose 0.5% from the previous month to 1.75 million metric tonnes, the highest since February, the Malaysian Palm Oil Board (MPOB) said.

The data from the world's second-largest palm oil producer after Indonesia could potentially weigh on benchmark futures. Prices were down about 0.6% by the midday trading break.

Crude palm oil production gained 13.48% from April to 1.70 million tonnes, the biggest in six months.

Palm oil exports also rose to a six-month high of 1.38 million tonnes, up 11.66% from April, the MPOB said.

A Reuters survey had forecast May inventories at 1.75 million tonnes, with output at 1.65 million tonnes and exports at 1.41 million tonnes.  

"The growth in production has far exceeded industry expectations," said a New Delhi-based dealer with a global trade house.

"If this trend continues in the coming months, prices could come under pressure, especially if exports don't rise above 1.5 million tonnes, which looks difficult."

The MPOB report is neutral for the market, said Anilkumar Bagani, research head of vegetable oils broker Sunvin Group.

Palm oil's discount to rival soybean and sunflower oil makes it attractive to price-sensitive buyers such as India, he said.