He attributed it to the recent floods that have hit production, and the approaching Ramadan, that has boosted demand.

The drop in inventories in the world’s second-largest palm oil-producing country after Indonesia could support benchmark futures, and sustain the commodity’s premium over competing oils.

“Floods in eastern parts of the country have reduced palm oil production in both January and February,” Ahmad Parveez Ghulam Kadir, the director-general of the Malaysian Palm Oil Board (MPOB), said.

Widespread flooding had hit regions across Malaysia since November last year, displacing more than 90,000 people.

Another wave of floods in January forced thousands from their homes in Sarawak and Sabah.

“This is the time where we will see buying increase, which I believe will keep prices stable and bring down stock levels,” Ahmad Parveez said.

Palm oil consumption typically surges during Ramadan as Muslims use the oil to prepare meals to break their fast, and during banquets to celebrate the Aidilfitri holiday that marks the end of the fasting period.

Malaysia’s palm oil stocks fell 7.55% to 1.58 million tonnes in January over December’s figure, the lowest level in 21 months, because of a plunge in output.

Lower production has resulted in tight supplies, ensuring palm oil trades at a premium over rival soyoil and sunflower oil, in January from December, according to Ahmad Parveez.

“Palm oil’s premium could lead to lower demand in price-sensitive markets such as India, but prices will remain stable until the supply situation improves.

“Despite difficulties so far this year, Malaysia’s production is likely to rise to 19.5 million tonnes in 2025, up from 19.34 million tonnes a year ago, due to increased labour supplies and ongoing improvements in agricultural practices,” he said.