Palm Oil Market Heat: Futures Rally, EU Imports Drop — What’s Next?

The palm oil market is experiencing a dynamic phase, fueled by both supportive fundamentals and emerging external challenges. Over the past week, Malaysian palm oil futures hit a two-week high, driven by a firming trend in global vegetable oil markets and supported by a weaker Malaysian ringgit and surging crude oil prices. However, the rally was tempered midweek as both palm oil futures in Kuala Lumpur and soybean oil contracts in Chicago posted slight declines in early trading. The atmosphere is further complicated by logistic and geopolitical uncertainties stemming from rising tensions in the Black Sea, which hold the potential to disrupt sunflower oil and seed exports from Russia and Ukraine — indirectly favoring rival oils like palm.

On the trade front, European Union palm oil imports have dropped notably, with the latest Commission data showing an 18% year-over-year decrease to 1.17 million tonnes by late November. This contraction spotlights changing demand patterns and possibly stricter sustainability regulations in Europe, while also reflecting broader softness in oilseeds imports across the board. Demand from China remains uncertain, with soybean imports shifting heavily towards Brazil, reducing pressure on the soybean oil complex and, in turn, affecting sentiment in the palm oil market. These factors create a nuanced outlook where price direction will be determined by developments in global vegetable oils, energy markets, regional weather patterns in Southeast Asia, and geopolitical headlines.

📈 Prices & Sentiment

Exchange	Product	Closing Price	Weekly Change	Sentiment
Bursa Malaysia	Palm Oil Futures (Jan)	RM 3,985/tonne	+3.4%	Moderately Bullish
Dalian Commodity Exchange	Palm Oil Futures	CNY 7,870/tonne	+2.8%	Bullish
Euronext (EU)	Palm Oil (physical)	EUR 845/tonne*	-1.2%	Neutral

*Indicative physical import value, market thin

🌍 Supply & Demand Drivers

• EU palm oil imports: Down 18% year-over-year to 1.17 million tonnes, indicating weak demand and possibly regulatory headwinds.
• Competing oils: Black Sea tensions threaten sunflower oil supply, potentially benefiting palm and soybean oil markets.
• China demand: Preference for Brazilian soybeans over U.S. has pressured soy oil, dampening further palm oil upside.
• Energy markets: Higher crude oil prices offer price support as palm oil becomes more attractive for biodiesel blending.
• FX support: Weaker Malaysian ringgit makes exports more competitive.

📊 Fundamentals & Market Data

• Malaysia/Indonesia production: Output is seasonally declining post-peak harvest, with recent rains affecting logistics but not significantly hampering supply.
• Global stocks: Inventory levels are comfortable but trending lower due to reduced output and steady Asian domestic demand.
• EU import mix: All oilseeds show declining imports (soybeans -14%, rapeseed -39%), amplifying focus on palm oil’s strategic supply position.

🌦️ Weather Outlook & Yield Impacts

• Malaysia/Indonesia: The current forecast calls for above-average rainfall in Sumatra and Borneo, which may hinder harvest logistics and output in the near term but could boost subsequent yields if excessive flooding is avoided.
• El Niño/La Niña watch: No acute weather stress at present, but close monitoring is required as climatic shifts could influence yields for the remainder of the 2024/25 season.

🌐 Global Production & Stocks Snapshot

Country	2024/25 Production (mn tonnes)	Stocks (mn tonnes)	Year-on-Year Change
Indonesia	48.5	3.9	Production +2%, stocks -0.3mn
Malaysia	18.4	1.8	Production stable, stocks -0.2mn
EU (imports)	1.17*	n/a	Imports -18%

*season-to-date, EU data as of Nov 30

📆 Trading Outlook & Recommendations

• Current price action suggests further consolidation after recent gains; upside capped unless Black Sea disruptions intensify or energy prices surge further.
• Biodiesel demand as a key swing factor; monitor for changes in mandates in Indonesia or EU.
• Traders: Watch weather in Southeast Asia and currency movements for new directional cues.
• Industry: Exporters may consider accelerating shipments on a weaker ringgit and current price strength.
• Buyers: Opportunity to secure forward cover if prices ease in the coming sessions; monitor for potential supply disruptions from competing origins.

⏳ 3-Day Regional Price Forecast

Region/Exchange	Direction	Range	Comment
Kuala Lumpur (BMD)	Sideways/Bearish	RM 3,920 – RM 4,020	Profit-taking and global cues
Dalian (China)	Sideways	CNY 7,850 – 7,950	Strong vegoil prices support, but capped by soy complex
Rotterdam (EU physical)	Soft/Bearish	EUR 830 – 850/tonne	Weaker import demand, EU regulation