Palm oil stocks are expected to decline as the low production cycle has started and some traders expect December production to be around 14 per cent lower than the previous month.

“The market has been on an upward trend. Although exports are lower, production is dropping at a greater rate,” said one of the dealers.

Cargo surveyor Societe Generale de Surveillance reported that Malaysian palm oil products for the first 25 days of December dropped 14.5 per cent to 1.012 million tonnes from 1.184 million tonnes shipped in the same period in November.

According to the dealers, buyers remain bullish on the price outlook given gains in crude oil are also supporting the market.

Oil prices hit a four-week high at above US$78 (US$1.00 = RM3.46) a barrel, buoyed by signs of an economic recovery in the US and large declines in US crude inventories.

At the close of trading yesterday, the CPO futures for January 2010 rose RM39 to RM2,535 per tonne, February 2010 gained RM34 to RM2,571 per tonne, March 2010 added RM38 to RM2,592 per tonne and April 2010 increased RM56 to RM2,610 per tonne.

Turnover was higher at 9,020 lots compared to 8,233 lots recorded last Thursday while open interest declined to 83,309 contracts from 84,589 contacts previously.

On the physical market, the newly traded January South, which replaced the December contract, was higher at RM2,550 per tonne compared to last Thursday’s closing of RM2,500 per tonne.