Palm Oil Market: Strong Fundamentals, Flat Prices—Key Drivers for Q3 2024

The palm oil market has entered a phase of cautious optimism and consolidation as we close out June 2024. Malaysian palm oil futures have been trading sideways, with the benchmark front-month contract settling up just 0.05% at 4,102 MYR/t (963.59 USD/t), marking the sixth consecutive week of positive returns despite a recent day of softer prices in Kuala Lumpur. Chinese vegetable oil futures, especially on the Dalian exchange, have shown sturdy gains, providing some support, yet the absence of fresh buying interest from crucial import markets like India is tempering further advances. Behind these price movements is a tapestry of mixed signals: robust production and higher inventories across Malaysia and Indonesia, volatile crude oil prices, and fierce competition from soybean and sunflower oils globally.

In June, Malaysia’s palm oil stocks rose, reflecting harvest gains and slightly slower export momentum, even as India and China maintained strong, though not record-breaking, import volumes. Macroeconomic headwinds and currency volatility add further complexity, but weather patterns in Southeast Asia remain generally favourable, with scattered showers sustaining yield prospects. In this report, we dissect price action, supply and demand drivers, global fundamentals, and weather influences, concluding with actionable trading strategies and a short-term price forecast.

📈 Prices & Market Sentiment

Contract	Close (MYR/t)	Weekly Change	Sentiment
Jul 25	4,114 MYR/t	+0.88%	Neutral/Firm
Aug 25	4,134 MYR/t	+0.85%	Neutral/Firm
Sep 25	4,143 MYR/t	+0.94%	Neutral/Firm
Oct 25	4,133 MYR/t	+0.82%	Neutral
Nov 25	4,140 MYR/t	+0.99%	Neutral/Firm
Dec 25	4,145 MYR/t	+0.89%	Neutral

MDEX, 20 June 2025 closing prices; USD = 963.59/t (front month). Sentiment leans sideways amid technical resistance and fluctuating demand flows.

🌍 Supply & Demand Drivers

• Export Demand: China and India remain primary buyers. Indian imports surged in May as lower prices boosted buying, but June saw cautious replenishment amid high domestic stocks.
  Key figure: Expected Indian imports for June: ~0.75 million tons, up from recent lows but below average peaks【6:5†full-posts-2024.json】.
• Production & Stocks: Malaysian palm oil output climbed over 12% month/month in May, pushing stocks towards 1.75 million tons, moderately above 2023 levels. Indonesia’s inventories are also stable but high, as export quotas continue.
• Competing Oils: Soybean and sunflower oils are exerting price pressure. Global vegetable oil production hit a record, but palm oil’s competitive price versus soyoil (spot: $950/t) is underpinning physical demand【6:9†full-posts-2024.json】.
• Speculative Positioning: Managed money trimmed some long exposure as supply concerns loom, but aggressive selling is absent as weather and macro risks are balanced【6:11†full-posts-2025.json】.
• Regulatory & Policy: India’s reduction of import duties on edible oils has stimulated some demand recovery, but high stocks and price sensitivity cap major upswings【6:3†full-posts-2025.json】.

📊 Fundamentals & Global Comparison

Country	2024 Production (mln t)	2024 Ending Stocks (mln t)	2024 Exports/Imports (mln t)
Indonesia	49.0	3.8	28.2 (exp.)
Malaysia	19.0	1.7	15.8 (exp.)
India	–	1.2	10.9 (imp.)
EU	–	0.7	6.5 (imp.)
China	–	0.85	6.8 (imp.)

Sources: MPOB, USDA, Oil World, June 2024 update【6:11†full-posts-2025.json】.

⛅ Weather Outlook & Impact

• Malaysia: The Southwest Monsoon continues with scattered rainfall in Sabah and Sarawak, keeping soil moisture adequate for palm fruit development. No serious drought or flooding.
• Indonesia: Heavy localised rains benefit overall palm growth, albeit complicating some harvest logistics. Seasonal risk is contained with good short-term yield prospects.
• El Niño/Climate: Official agencies maintain an “El Niño Watch” for longer-term risks, but no imminent threats are seen for the next month【6:11†full-posts-2025.json】.

📌 Market Drivers Recap

• India: End of high import momentum from May as local stocks are replenished. Price-sensitive buying remains the norm.
• China: Vegetable oil futures firm but import volumes below highs; domestic demand steady.
• Crude Oil: Recent upswing in Brent offers some support for palm as a biofuel feedstock, though margins are tight.
• Currency: The stronger ringgit limits international competitiveness for Malaysian exports.

🔎 Trading Outlook & Recommendations

• Short-term: Neutral-to-weak. Strong supplies cap any major rallies; price drops below 4,000 MYR/t could trigger renewed buying.
• Hedgers: Maintain basis hedges on Q3 positions, favour coverage for autumn delivery.
• Processors & Refiners: Monitor regulatory changes in India/China and global energy price trends closely for margin impacts.
• Speculators: Avoid major long exposure untila  clear pick-up in import buying; focus on spread trades against soybean oil.
• Watch for: Next MPOB and USDA reports, Indian festival buying (Q3), Chinese state reserve auctions, and emerging weather risks.

📆 3-Day Regional Price Forecast

 

Exchange	Spot Price	Forecast Range	Trend
Bursa Malaysia (MDEX)	4,102 MYR/t	4,060 – 4,130 MYR/t	Slight Downside-Ranging
Dalian (China, USD/t eq.)	~965 USD/t	950 – 975 USD/t	Slight Downside/Stable
India (CIF, spot)	950 USD/t	940 – 960 USD/t	Stable

Summary: The Market is stabilising at a high base. Near-term downside risk persists until a demand catalyst emerges or stocks retreat. Monitor key consumer policy shifts and updates from major producers for the next trend signal.