KUALA LUMPUR/MUMBAI (Jan 10): Malaysia's palm oil stocks fell for a third consecutive month in December to hit their lowest since May 2023, as output dropped due to floods, data from the industry regulator showed on Friday.

The drop in inventories in the world's second-largest palm oil producer after Indonesia could support benchmark futures, which have corrected sharply in recent weeks after rising to their highest in about 2½ years in November.

Malaysia's palm oil stocks at the end of December fell 6.91% from a month earlier to a 19-month low of 1.71 million tonnes, the Malaysian Palm Oil Board (MPOB) data showed.

Crude palm oil production was down 8.3% to 1.49 million tonnes, the lowest since March 2024, while palm oil exports fell 9.97% to a six-month low of 1.34 million tonnes.    

A Reuters survey had forecast inventories at 1.76 million tonnes, output at 1.48 million tonnes and exports at 1.38 million tonnes.

The MPOB data for December is slightly bullish for the market, as inventories dropped more than forecast due to a rise in local consumption, said Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group.

Malaysia's palm oil consumption jumped 53% in December from a month earlier to 309,865 tonnes, the data showed.

Palm oil has been trading at a premium to rival soybean and sunflower oils, and it needs to correct to attract demand from price-sensitive buyers, said a Mumbai-based trader with a global trade house.

"Even in January, exports are likely to remain subdued," the trader said.

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