Palm oil advanced for the first time in five days on speculation that a drop in output and stockpiles of the commodity in Malaysia, the second-largest producer, may add to global supply concerns.

March-delivery futures on the Malaysia Derivatives Exchange gained 0.4 percent to settle at 3,518 ringgit ($1,119) a metric ton in Kuala Lumpur. The most-active contract declined 3.6 percent last week.

“Crude palm-oil prices will continue to hold up into the first quarter of 2011 as stock levels fall further,” Bernard Ching, an analyst at ECM Libra Capital Sdn., said in a report.

Palm oil has surged 32 percent this year, heading for a second annual advance, on speculation that rising demand from China and India, the largest users, may strain global supplies that have been curbed by rain and drought in producing nations. The most-active contract reached 3,766 ringgit on Dec. 14, the highest level in 33 months.

Output in Malaysia fell to the lowest in five months in November, while stockpiles shrank for the first time in four months, the nation’s palm oil board said Dec. 10. Heavy rain caused by the La Nina weather event has also reduced oil-palm yields in Indonesia, the biggest grower.

“The market is likely to remain range-bound as the holiday mood has set in,” Veeresh Hiremath, associate chief analyst at Karvy Comtrade Ltd. said from Hyderabad in India. “Exports have been disappointing.”

‘Within Expectations’

Shipments from Malaysia slumped 26 percent in the first 20 days of December to 776,910 tons, surveyor Intertek said today. Sales plunged 27 percent to 799,071 tons, rival Societe Generale de Surveillance said.

“The decline is generally within expectations as pre- stocking for the festive season was completed over November,” ECM Libra’s Ching said.

March-delivery soybean oil on the Chicago Board of Trade advanced as much as 1 percent to 55.19 cents per pound.

In China, palm oil for September on the Dalian Commodity Exchange closed 0.6 percent lower at 9,340 yuan ($1,400) a ton, paring losses of as much as 2.1 percent in intraday trading. Soybean oil closed 0.1 percent higher at 10,046 yuan a ton.

China plans to sell 100,000 tons rapeseed oil in auctions tomorrow, the official information carrier National Grain Trade Center of Hefei said in a statement on its website dated Dec. 17. The government will also auction nearly 1.8 million tons of corn as part of its weekly series of offerings, the center said.