Palm oil markets entered the week showing notable volatility, as Malaysia’s Bursa Malaysia Derivatives Exchange (MDEX) resumed trading after a public holiday. Traders quickly responded to a key policy decision by the Indian government, which cut import duties on unrefined edible oils, aiming to curb food inflation and bolster domestic supply. Combined with rising vegetable oil futures in China (Dalian exchange) and firmer global crude oil prices, these moves initially offered support.
However, after a brief uptick, prices eased across all active contracts, reflecting ongoing concerns about oversupply, seasonal production gains, and the prospect of a weaker demand environment as inventories build in key importers. The Southeast Asian monsoon is now in full swing, increasing operational challenges in plantations, but recent forecasts suggest sufficient rainfall, alleviating some fears of yield losses.
This report dissects the latest trends, evaluates fundamental supply and demand metrics, contextualises the recent policy changes, and offers an outlook amid continued macroeconomic and weather risks.
📈 Prices: Latest Palm Oil Futures Overview
| Contract | Closing Price (MYR/t) | Weekly Change (MYR) | Change (%) | Market Sentiment |
|---|---|---|---|---|
| Jun 25 | 3888 | -41 | -1.05% | Bearish |
| Jul 25 | 3891 | -51 | -1.31% | Bearish |
| Aug 25 | 3878 | -54 | -1.39% | Bearish |
| Sep 25 | 3870 | -51 | -1.32% | Bearish |
| Oct 25 | 3870 | -49 | -1.27% | Bearish |
| Nov 25 | 3874 | -46 | -1.19% | Bearish |
| Dec 25 | 3888 | -46 | -1.18% | Bearish |
| Jan 26 | 3905 | -45 | -1.15% | Bearish |
| Feb 26 | 3914 | -44 | -1.12% | Bearish |
| Mar 26 | 3915 | -40 | -1.02% | Bearish |
Summary: Palm oil futures fell across the forward curve by 1–1.4% compared to previous closes, with clear bearish sentiment dominating the week due to policy shifts and high inventories.
🌍 Supply & Demand Drivers
- Indian Import Policy: India, the world’s largest palm oil importer, lowered import tariffs on unrefined edible oils. This move could stimulate import demand, but the potential inventory buildup and local price caps may dampen actual arrivals in the short term.
- Chinese Demand: Stronger Dalian vegetable oil prices and recovering post-pandemic consumption are providing a floor for regional prices, but are not enough to reverse broad market weakness.
- Global Stocks: Malaysia’s palm oil stocks remain above 1.85 million tonnes, up slightly month-on-month; Indonesia is still managing large inventories with export quotas but is sending more product to markets like China and Pakistan.
- Crude Oil Linkage: Recent raw crude oil price strength keeps interest in palm-based biodiesel steady. However, tightening margins due to the previous rally in input prices limit upside.
- Speculative Positioning: Managed money has trimmed long positions slightly due to rising supply concerns and macroeconomic uncertainty.
📊 Fundamentals & Global Comparisons
| Country | 2023/24 Production (mln t) | 2023/24 Ending Stocks (mln t) | 2023/24 Exports (mln t) |
|---|---|---|---|
| Indonesia | 47.3 | 4.5 | 28.2 |
| Malaysia | 19.1 | 1.95 | 15.8 |
| India (Imports) | – | 1.25 | 10.9 (Imports) |
| EU (Imports) | – | 0.70 | 6.5 (Imports) |
| China (Imports) | – | 0.85 | 6.8 (Imports) |
Key Insight: Indonesia and Malaysia together supply over 85% of global palm oil. Their production trends, export policies, and weather significantly shape the world price direction.
⛅ Weather Outlook & Impact
- Malay Peninsula: The Southwest Monsoon is bringing scattered rainfall; current precipitation levels are normal-to-above normal in key regions (Sabah, Sarawak). No extreme drought or flood warnings, supporting stable yields in the near term.
- Sumatra/Kalimantan (Indonesia): Localised heavy rain has complicated harvest logistics, but improves moisture reserves and palm fruit development. Good for medium-term production, but slight downside risk for near-term output.
- Overall: Near-term weather risks are contained; medium-term yield outlook remains stable.
📆 Market Drivers Recap
- Indian tariff cut for edible oil imports
- Resumption of Malaysian trading after the holiday
- Firmness in Chinese vegetable oil futures
- Pressure from high old-crop inventories and seasonal production uptick
- Support from stronger global crude oil markets
🔎 Trading Outlook & Recommendations
- Short-term outlook: Bearish bias, with price rallies likely capped by ample supplies and muted near-term demand growth.
- Hedgers: Consider securing short hedges for Q3–Q4; basis risk remains as spot demand uncertain.
- Processors: Monitor import policy moves, especially in India and China, for demand signals.
- Speculators: Downside appears limited below MYR 3,800/t support, but avoid aggressive long exposure until clear demand pickup.
- Watch for: Next MPOB and USDA updates, weekly Chinese buying pace, and Indian import arrivals data.
🔮 3-Day Regional Price Forecast
| Exchange | Spot Price (MYR/t) | Forecast Range (MYR/t) | Trend |
|---|---|---|---|
| Bursa Malaysia (MDEX) | ~3890 | 3850 – 3920 | Slight Downside |
| Dalian (China, CNY/t equiv.) | Current: firm | Mildly higher | Stable/Bullish |
| India Import Price (USD/t) | ~950 | 940 – 970 | Stable |
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