Palm oil demand strong as top buyers China, India restock inventories

Palm oil demand is expected to remain robust for the rest of the month as key consumer countries India and China rebuild low stock levels, bucking a seasonal trend in which shipments of the tropical oil typically taper off at year-end.

A narrow discount to a rival edible oil, however, could limit demand growth moving forward, say traders and analysts, since buyers usually switch to more favoured soyoil when its price premium over palm narrows.

The price differential or the spread between palm oil on the Bursa Malaysia Derivatives Exchange and Chicago Board of Trade soyoil has been hovering between $80 and $90 a tonne, soyoil's narrowest premium over palm since February.

"For October we're looking at a 10 to 13 percent gain in exports, mainly from China and India, though India demand may slow compared to the previous month," said David Ng, a derivatives specialist at Phillip Futures in Kuala Lumpur.

India and China are the world's top two buyers of palm oil, and command a substantial share of global demand. Palm oil import demand from China and India, which celebrate the Mid-Autumn and Diwali festivals respectively this month, had already gained in September as buyers stocked up ahead of the events.

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