Malaysian palm oil inventories rose 5% mom to a 21-month high of 2.28m tonnes in Nov, 1% below our and consensus projections. We view this as a neutral event, as this development is in line with our and market projections. We project short-term CPO prices to remain range-bound and supported by the seasonally-lower palm oil output in the coming months, higher biodiesel mandate of 7% in Malaysia, potential El Nino event and upcoming festival restocking activities. However, we are concerned about biodiesel demand risk due to the sharp fall in crude oil prices, which makes biodiesel conversion uneconomical. Our Neutral stance and top picks, First Resources, AALI and SIMP, are intact.