Malaysian palm oil futures remain under pressure below MYR 4,700 per tonne, with weakness in competing Dalian-traded edible oils and expectations of rising inventories weighing on market sentiment. Record stock levels, peak seasonal production and lower Indonesian export charges are adding to concerns about available supply.

However, the market is receiving some support from firm export demand, a weaker Malaysian ringgit and a modest recovery in crude oil prices. October shipments increased sharply, partly reflecting pre-Diwali buying from India, the world’s largest palm oil importer.

The market is now looking towards the Malaysian Palm Oil Board’s monthly report due on November 10, which could provide further clarity on production, exports and inventory levels.

Market Snapshot

Current Price Action: Palm Oil Extends Decline Below MYR 4,700

Malaysian palm oil futures have extended their decline, remaining below MYR 4,700 per tonne as weakness across Dalian-traded edible oils continues to influence sentiment.

The broader edible-oil complex is facing pressure from expectations of abundant supply and rising inventories. Malaysia’s stock levels reached a record high in September, with further accumulation expected as seasonal production remains elevated.

The prospect of inventories exceeding 3 million tonnes by year-end is particularly important for the market. Higher stocks increase the amount of available supply and can limit the potential for sustained price recovery unless export demand strengthens sufficiently to absorb additional production.

Traders are also adopting a cautious approach ahead of the Malaysian Palm Oil Board’s November 10 report, which is expected to provide updated figures on the country’s supply and demand position.

Record Inventories and Seasonal Production Weigh on Prices

Inventory accumulation remains one of the most significant bearish influences on palm oil.

Stocks reached a record high in September, reflecting the combination of production availability and the seasonal supply cycle. With output expected to remain elevated during the peak production period, inventories could continue building into the end of the year.

If Malaysian stocks exceed 3 million tonnes, the market could face additional pressure as buyers gain greater access to readily available supplies.

The key question is whether export demand can absorb the additional production quickly enough to prevent further inventory accumulation.

Without stronger export growth or a meaningful slowdown in production, elevated stocks are likely to remain a significant obstacle to a sustained recovery.

Indonesia Cuts November Export Reference Price and Charges

Indonesia, the world’s largest palm oil producer, has reduced its November crude palm oil reference price by 6.1% to USD 978.90 per tonne.

The adjustment has also lowered the combined export duty and levy by approximately 20%, bringing the total to USD 246.36 per tonne.

Lower export charges can improve the competitiveness of Indonesian palm oil in international markets by reducing the additional costs associated with overseas sales.

This may support export activity and improve the ability of Indonesian suppliers to compete for international demand. However, greater export competitiveness could also increase the availability of palm oil in the global market, adding to pressure on competing suppliers and prices.

For Malaysian futures, developments in Indonesian pricing and export policy remain important because of Indonesia’s dominant position in global production and trade.

October Exports Provide an Important Source of Support

Despite concerns over inventories, export demand has remained firm.

Cargo surveyors reported that Malaysian palm oil shipments increased between 45.4% and 73.5% month-on-month in October.

The strong performance was partly supported by pre-Diwali buying from India, the world’s largest palm oil importer. Seasonal purchasing ahead of the festival provided an important boost to export demand.

Stronger shipments could help reduce the pace of inventory accumulation, particularly if buying interest remains firm beyond the seasonal demand period.

However, traders will need to determine whether October’s export strength represents a sustained improvement in demand or a temporary increase linked to pre-festival purchasing.

Weaker Ringgit and Higher Crude Oil Offer Price Support

Two external factors are helping limit the downside in Malaysian palm oil.

First, a weaker Malaysian ringgit can make palm oil more attractive to overseas buyers by reducing its cost in foreign-currency terms. Currency movements are particularly important for internationally traded agricultural commodities, where exchange-rate changes can influence purchasing decisions and export competitiveness.

Second, a modest recovery in crude oil prices has improved palm oil’s appeal as a biodiesel feedstock.

Higher crude oil prices can improve the relative economics of vegetable oils used in biofuel production, potentially supporting demand for palm oil in energy-related applications.

However, the support from these factors remains conditional. A stronger ringgit or renewed weakness in crude oil could remove some of the market’s current support.

Bullish Sentiment: Factors Supporting Palm Oil Prices

1. Strong October exports: Malaysian shipments increased between 45.4% and 73.5% month-on-month, indicating substantial buying activity.
2. Indian seasonal demand: Pre-Diwali purchasing from India provided an important boost to October exports.
3. Weaker Malaysian ringgit: Currency depreciation can improve the competitiveness of Malaysian palm oil for international buyers.
4. Crude oil recovery: Higher energy prices improve the relative attractiveness of palm oil as a biodiesel feedstock.
5. Potential inventory relief: If export demand remains strong, increased shipments could help slow the accumulation of Malaysian stocks.
6. Indonesian export competitiveness: Lower export charges may support international trade volumes, although the resulting increase in available supply could also limit prices.

Bearish Sentiment: Risks Facing Palm Oil Prices

1. Record Malaysian inventories: September stocks reached a record high, creating a substantial supply overhang.
2. Year-end stock accumulation: Inventories are expected to exceed 3 million tonnes by the end of the year.
3. Peak seasonal production: Higher production availability could continue adding to stocks if demand does not keep pace.
4. Weakness in Dalian edible oils: Lower prices in competing vegetable-oil markets are weighing on Malaysian futures.
5. Lower Indonesian export charges: Reduced duties and levies could improve export competitiveness and increase global supply availability.
6. Uncertainty over Indian demand: October’s strong shipments were partly driven by pre-Diwali buying, raising questions about the sustainability of demand after the seasonal purchasing period.

Price Forecast: What Palm Oil Traders Are Watching

Palm oil’s near-term outlook remains cautious while prices trade below MYR 4,700 per tonne.

The most important immediate influence is the balance between Malaysian inventory accumulation and export demand. If production remains strong and stocks continue rising, prices could face further downward pressure.

However, the sharp increase in October shipments suggests that international demand remains capable of absorbing significant volumes. If export activity continues at a strong pace, it could help stabilise the market and limit further inventory growth.

The November 10 Malaysian Palm Oil Board report will be a key event for traders. Updated figures on production, exports and stocks could influence expectations for the remainder of the year.

Market participants will also monitor:

• Malaysian production and inventory developments.
• Export demand from India and other major importing markets.
• Dalian-traded soybean oil and other competing edible oils.
• Indonesian export policy and reference pricing.
• Malaysian ringgit movements.
• Crude oil prices and biodiesel demand economics.

A combination of stronger exports, a weaker ringgit and firmer crude oil could improve sentiment. Conversely, further inventory accumulation and weakness across competing vegetable oils would reinforce the bearish outlook.

Palm Oil Supply Outlook

The supply outlook remains challenging as Malaysia moves through its peak seasonal production period.

September’s record inventory level demonstrates the scale of available supply, while expectations that stocks could exceed 3 million tonnes by year-end suggest that the market may remain well supplied.

Indonesia’s lower November reference price and reduced export charges also create the potential for stronger export competitiveness.

The principal risk for prices is that production continues to exceed the volume that international buyers are prepared to absorb. Unless exports remain strong or seasonal output begins to moderate, inventory levels could continue to weigh on futures.

Palm Oil Demand Outlook

Demand has provided a positive counterweight to the expanding supply outlook.

October shipments increased sharply, supported in part by Indian pre-Diwali buying. As the world’s largest palm oil importer, India’s purchasing activity remains an important influence on international demand.

The biodiesel market also offers a potential source of support. A recovery in crude oil prices can improve the relative economics of palm oil as a feedstock, potentially strengthening demand from energy-related applications.

Nevertheless, traders will be watching whether export demand remains resilient after the seasonal Indian buying period. The ability of importing countries to maintain purchasing volumes will be central to determining whether inventories continue rising or begin to stabilise.

Market Outlook for the Coming Sessions

Malaysian palm oil futures enter the coming sessions with a bearish underlying supply picture, although strong export demand and supportive currency and energy-market developments are limiting losses.

The market’s immediate direction is likely to depend on whether October’s export momentum can continue into November and whether production begins to ease following the seasonal peak.

The November 10 Malaysian Palm Oil Board report represents the next major supply and demand catalyst. A further increase in inventories could reinforce selling pressure, while stronger-than-expected exports or a moderation in production could improve sentiment.

For now, the region below MYR 4,700 remains an important reference point, with traders assessing whether abundant stocks will outweigh improving export demand.

Today Markets Analysis

Palm oil is facing a clear conflict between strong export activity and an expanding supply position.

The increase in October shipments is encouraging, particularly given India’s importance as a major importer. However, record Malaysian inventories and expectations of year-end stocks exceeding 3 million tonnes indicate that supply remains abundant.

The reduction in Indonesian export charges adds another competitive dimension, while the weaker ringgit and recovering crude oil prices are providing some support.

The next decisive signal is likely to come from the Malaysian Palm Oil Board’s November report. Until production and inventory trends become clearer, the market is likely to remain sensitive to export figures, competing edible-oil prices and movements in the energy complex.

Currency Hedger View

Palm oil importers, exporters, processors and food manufacturers face exposure to both commodity-price movements and currency fluctuations.

For international buyers, changes in the Malaysian ringgit can influence the effective cost of palm oil purchases, even when the underlying futures price remains relatively stable.

Exporters receiving revenue in US dollars may also experience changes in the local-currency value of their receipts as exchange rates fluctuate.

Businesses with recurring palm oil purchases or export contracts should assess their expected transaction values, settlement currencies and payment schedules. Managing the foreign-exchange component of a commodity transaction may help improve cost visibility and protect operating margins.

Currency Hedger highlights the importance of managing commodity exposure and currency risk together when planning international agricultural purchases and sales.

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Disclaimer: This article is for informational and market commentary purposes only and does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument. Commodity and currency markets involve risk, and prices can move rapidly in response to supply, demand, weather, energy and economic developments. Forecasts and market expectations may change as new information becomes available. Businesses should seek appropriate professional advice before entering into financial transactions.