Palm Oil Market: Volatility Persists as Competing Oils and Weather Steer Direction

The palm oil market remains volatile, buffeted by shifting global policies, competitive pressures from other vegetable oils, and unpredictable macroeconomic cues, particularly from the energy complex. In the past weeks, prices on Bursa Malaysia have struggled to hold gains despite intermittent surges, with soyoil and sunflower oil trends exerting a gravitational pull on market sentiment. A technical rebound in the last session provided only fleeting relief after a wave of selling triggered by a downturn in both soy oil and crude oil. Export demand from key buyers such as India and Pakistan has propped up prices, but rising inventories and a forecasted seasonal rise in production are keeping bullish enthusiasm in check. Meanwhile, the ringgit’s weakness has improved Malaysia’s export competitiveness, buta  simultaneous softening in global crude oil dampens biodiesel-linked demand.

Weather remains a watch point: this monsoon, key palm-growing regions in Malaysia and Indonesia are enjoying regular rainfall, supporting forecasts for robust yields. Nonetheless, the market keeps a wary eye on policy-driven surprises and the evolving rivalry among edible oils, with palm oil’s typically wide price advantage keeping it in the import basket for Asia, even as end users periodically switch to alternatives when margins tighten. These complex dynamics set the stage for uncertainty through July and into early Q3, requiring cautious positioning for all market participants.

📈 Prices & Market Sentiment

Contract	Close (MYR/t)	Close (EUR/t)	Weekly Change	Sentiment
Jul 25	3,846	769.20	-4.40 EUR	Bearish
Aug 25	3,835	767.00	-4.20 EUR	Bearish
Sep 25	3,831	766.20	-4.20 EUR	Bearish

• Latest palm oil futures (Bursa Malaysia) see continued pressure, tracking weaknesses in rival soyoil and crude oil prices.
• Daily moves show technical corrections amid stability in physical demand.

🌍 Supply & Demand Drivers

• Export Demand: Shipments to India and Pakistan remain robust, supported by palm oil’s discount to other oils.
• Inventory Levels: Malaysian stocks are expected to rise seasonally; May stocks may exceed 1.9m t, the highest since late 2023.
• Production Outlook: Recovery in labour and favourable weather underpin a forecasted increase in Malaysian and Indonesian output for the coming months.
• Competing Oils: Soyoil and sunflower oil pricing remain key; global surpluses continue to bear down on palm oil, but temporary export spikes can instigate sharp reversals.
• Macro Factors: Brent crude weakness limits biofuel demand; ringgit softness supports export competitiveness.

📊 Fundamentals: Global Stocks & Production

Region/Country	2025/26 Output (m t)	Ending Stocks (m t)
Indonesia	48.5	3.4
Malaysia	19.2	2.0
India (imports)	0.4	1.5
China (imports)	0.5	1.1
World	78.5	8.5

• Indonesia and Malaysia account for over 85% of global output.
• Palm oil stock-to-use ratio expected to rise marginally as production climbs for the 2025/26 season.

⛅ Weather Outlook

• Malaysia: Favourable. Regular rainfall reinforces good yield prospects; no major weather threats forecast short term.
• Indonesia: Stable. Adequate soil moisture, low risk of adverse weather impacts in July.
• Weather is not a major market mover short-term, but it strengthens the outlook for production stability into Q3.

📝 Key Market Drivers

• Soy oil trends: Heavy soyoil declines, especially from biodiesel policy rumours, drag palm prices lower.
• Crude oil drop: Weaker petroleum prices curb biodiesel demand, amplifying downside.
• Currency: Weak ringgit neutralises some downside risk in the export market.
• Exports: Indian and Pakistani buyers are supportive; keep an eye on global festival demand upticks in August/September.

📆 Trading Strategy & Market Outlook

• Support zone: 760–770 EUR/t (Jul 25 contract); short-term downside seen as limited if export flows hold.
• Longs: Consider re-entry only if soy oil or export numbers rebound.
• Sellers: Use rallies to hedge; lock in profits if technical resistance near 780–790 EUR/t approached.
• Monitor: U.S. biofuel policy announcements and Indian demand trends for catalysts.

🔮 3-Day Price Forecast (Jul 25 – Bursa Malaysia, EUR/t)

Date	Expected Range (EUR/t)	Outlook
Day 1	765 – 773	Sideways/weak
Day 2	762 – 772	Lower consolidation
Day 3	763 – 775	Monitor for technical bounce

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Conclusion: Without a clear catalyst from soyoil or crude oil, palm oil futures are consolidating in a lower trading range. Firm export flows cap short-term downside, but traders should remain defensive and watch for signals from energy markets and Asian import demand.

Last Report Comparison: The previous update cited a possible technical bounce above 3,800 MYR/t and a firming export trend. While July data confirm stable export flows, persistent commodity weakness has led to further price erosion, and only efficient hedging strategies have prevented deeper losses. Short-term volatility likely persists until policy and biofuel signals clarify.