Palm Oil Market: Price Recovery after Correction – A Tug of War Between Bears and Bulls

After a brief pullback that ended a three-day rally, the Malaysian palm oil market has once again found upward momentum, with futures rising on Wednesday morning in tandem with stronger crude oil prices. This recent volatility reflects the ongoing tug of war between bearish and bullish sentiment: profit-taking and weaker soybean oil on the Chicago exchange spurred selling, but persistent demand and energy market tailwinds keep a floor under prices. Market participants are closely monitoring external drivers—from weather developments in key Southeast Asian regions (which could affect yields and supply) to the evolving competitive landscape of global vegetable oils and speculative activity. Last week’s bearish close was quickly countered this week by renewed buying interest, highlighting the delicate balancing act in palm oil’s global supply and demand dynamics.

Fundamentals remain mixed: Malaysian stocks have moderated, but production forecasts suggest seasonally high output in the months ahead. India and China—the sector’s primary demand engines—show stable to slightly rising import requirements, but competition from cheaper sunflower and soybean oil supplies continues. Weather remains a headline risk, with South-East Asian monsoon forecasts and ongoing El Niño/La Niña uncertainty holding sway over both sentiment and the physical trade outlook. Traders should keep a close eye on speculative fund positions, directional moves in related agri-markets, and political signals about Indonesian export policy, which can all shift pricing within days.

📈 Prices

Contract	Close (MYR/t)	Change	Change (%)	Volume	Sentiment
Jul 25	4,078	+14	+0.34%	899	Firm
Aug 25	4,098	+26	+0.63%	3,218	Firm
Sep 25	4,096	+32	+0.78%	6,627	Firm
Oct 25	4,083	+32	+0.78%	949	Firm
Nov 25	4,079	+32	+0.78%	619	Firm
Dec 25	4,085	+30	+0.73%	319	Steady

Note: All prices in Malaysian Ringgit (MYR) per tonne. Latest update: June 18, 2025.

🌍 Supply & Demand

• Malaysia’s stocks: Slight moderation according to latest MPOB data; production seen seasonally strong for Q3 2025.
• Indonesia: Exports subject to government regulation; expectations of stable output despite policy uncertainty.
• India/China demand: Stable import forecasts, India may see renewed import activity as domestic edible oil reserves tighten.
• Competing oils: Discounts on sunflower and soybean oil limit palm’s upward potential. Recent soybean oil weakness in Chicago a near-term negative.

📊 Fundamentals

• USDA/Official Reports: Global 2024/25 palm oil production forecast to rise marginally, with price-supportive consumption in Southeast Asia and India.
• Speculative positioning: Managed money holdings turning slightly net-long after recent correction; short-term traders remain active.
• Global stocks: Cautiously watched, with importers maintaining just-in-time procurement strategies.

🌦️ Weather Outlook

• Southeast Asia: Monsoon arriving on schedule in Malaysia and Indonesia; rainfall patterns near-normal but watch for any emerging dry spells in Sabah/Sarawak or Sumatra, as these could tighten yields.
• El Niño/La Niña signals: Mixed forecasts with weak El Niño fading. Close monitoring required as any return of adverse weather could impact Q4 productivity.
• Impact: Present conditions suggest average to slightly above-average yields; a sudden shift could swiftly influence export availability and price direction.

🌐 Global Production & Stock Comparison

Country	2024/25 Output (Mt)	Stock (Mt)	YoY Change
Indonesia	48.5	4.0	+0.8%
Malaysia	19.0	1.8	+1.1%
Thailand	3.6	0.2	+0.6%
India	0.7	0.5	-0.2%
China	0.4	0.6	+0.2%

Note: Output and stocks in million tonnes (Mt). Source: USDA/MPOB, June 2025 estimates.

📆 Trading Outlook & Recommendations

• ⬆️ Upside if crude oil maintains its strength and Southeast Asian weather holds steady – monitor for any adverse shifts.
• ⬇️ Downside risk persists from weak soybean oil and profit-taking – short-term corrections remain possible.
• 🔍 Policy alert: Watch for Indonesia’s announcements on export quotas and levies.
• 🔄 Consider range-trading tactics as volatility increases during summer months.
• 🤝 End-user/procurement: Secure near-term coverage amid tightness, but remain flexible for Q3/Q4.

🔜 3-Day Price Forecast (MDEX, Kuala Lumpur)

Date	Forecast Range (MYR/t)	Bias
19 June	4,060 – 4,110	Neutral-to-Firm
20 June	4,050 – 4,100	Stable
21 June	4,040 – 4,110	Range-bound

Note: Volatility likely as market digests macro and weather news.