Malaysian palm oil futures remain under heavy selling pressure, trading below MYR 4,350 per tonne and hovering around their lowest levels since March. Prices are on course for their steepest weekly decline in almost two years as record-high inventories, falling rival edible oil prices and weaker crude oil markets combine to undermine sentiment.

The market is facing pressure from several directions. Lower crude oil prices have reduced the relative attractiveness of palm oil as a biodiesel feedstock, while Indonesia’s decision to cut its crude palm oil reference price and export levy has increased competition for Malaysian supplies. Uncertainty surrounding Malaysia’s own export tax policy is adding another layer of caution.

However, strong export demand and increased buying from India are providing some support, leaving traders to assess whether the recent decline has further room to run or whether improving shipments can help stabilise prices.

Market Snapshot

Palm Oil Prices Under Pressure From Multiple Market Forces

The decline in Malaysian palm oil futures reflects a combination of weaker external markets and growing concerns over supply competition.

Falling prices across rival edible oils have reduced the competitiveness of palm oil, while record-high inventories in Malaysia are reinforcing concerns that available supply remains elevated.

The weakness in crude oil is also significant. Lower energy prices reduce the economic incentive to use vegetable oils as biodiesel feedstock, weakening one of the important sources of demand support for palm oil.

With crude oil prices falling sharply on easing concerns over Middle East supply disruptions, the energy market is providing less support to the vegetable oil complex.

Indonesian Supply Becomes More Competitive

Competition from Indonesia is adding further pressure to Malaysian palm oil prices.

Indonesia, the world’s largest palm oil supplier, has reduced its November crude palm oil reference price by more than 6% and lowered its export levy. These adjustments make Indonesian supplies more competitive in international markets and could encourage buyers to favour Indonesian-origin cargoes.

The development creates an additional challenge for Malaysian exporters, particularly while inventories remain elevated.

At the same time, uncertainty over possible changes to Malaysia’s CPO export tax is discouraging market confidence. Any adjustment to export taxation could influence the relative competitiveness of Malaysian palm oil and affect trading decisions in the coming weeks.

Strong Exports and Indian Demand Provide Some Support

Despite the wider bearish environment, export demand remains an important counterweight.

Malaysian palm oil shipments in October surged between 45.4% and 73.5% compared with September, indicating a substantial improvement in export activity.

Demand from India has also strengthened, with palm oil imports climbing to a 14-month high ahead of Diwali. Increased buying from one of the world’s most important palm oil markets could help absorb some of the available supply.

However, the key question is whether this demand strength can continue at a pace sufficient to offset record inventories and growing competition from Indonesia.

Bullish Sentiment

1. Strong Malaysian exports: October shipments increased between 45.4% and 73.5% month-on-month, indicating improved international demand.
2. Higher Indian imports: Purchases from India reached a 14-month high ahead of Diwali, providing an important source of demand support.
3. Potential inventory absorption: Sustained export demand could help reduce Malaysia’s elevated stock levels over time.
4. Demand resilience: Continued buying from major importing countries could limit the extent of further price weakness, particularly if export momentum remains strong.

Bearish Sentiment

1. Record-high inventories: Elevated Malaysian stocks remain a major obstacle to price recovery and suggest that supply continues to exceed immediate demand requirements.
2. Falling rival edible oil prices: Weakness across competing vegetable oils is putting additional pressure on palm oil’s relative pricing position.
3. Lower crude oil prices: Reduced energy prices weaken the economic appeal of palm oil as a biodiesel feedstock.
4. More competitive Indonesian exports: Indonesia’s reduction in its November CPO reference price and export levy increases competition for Malaysian suppliers.
5. Malaysian export tax uncertainty: Potential changes to Malaysia’s CPO export tax are creating uncertainty around future pricing and export competitiveness.

Palm Oil Price Forecast: What Traders Are Watching

The immediate outlook for Malaysian palm oil remains cautious while prices trade below MYR 4,350 per tonne. The combination of record inventories, weaker crude oil and increased Indonesian competition creates a challenging environment for any sustained recovery.

The next important test will be whether strong export demand can translate into a meaningful reduction in Malaysian stock levels. October’s shipment figures and India’s increased imports are encouraging, but traders will need evidence that this demand strength is continuing rather than representing a temporary improvement.

The Malaysian Palm Oil Board’s monthly report, scheduled for November 10, will therefore be particularly important. Its inventory, production and export figures could help clarify whether the market is moving towards a better supply-demand balance or remains burdened by excess availability.

Supply Outlook

Supply remains the central bearish concern.

Record-high inventories suggest that the Malaysian market has substantial volumes available, while Indonesia’s more competitive export pricing could increase pressure on Malaysian sellers.

Traders will be watching the forthcoming Malaysian Palm Oil Board report for evidence of changes in production, stocks and export flows. A continued build-up in inventories would reinforce the current negative outlook, whereas a meaningful reduction could help ease selling pressure.

Demand Outlook

Demand signals are mixed.

October’s strong Malaysian export performance and India’s 14-month high in imports demonstrate that international buying has improved. However, the sustainability of this demand will be critical.

Lower crude oil prices could also reduce biodiesel-related demand support, while competition from Indonesia may influence purchasing decisions among major importers.

The market therefore needs continued export strength to offset the combination of elevated stocks and weaker energy markets.

Market Outlook for the Coming Sessions

Malaysian palm oil futures are likely to remain sensitive to inventory expectations, crude oil movements, Indonesian export policy and developments in international edible oil markets.

The immediate bias remains under pressure while prices stay below MYR 4,350 per tonne. However, the recent improvement in exports and stronger Indian imports suggest that demand has not disappeared and could help prevent an uncontrolled deterioration in prices.

The November 10 Malaysian Palm Oil Board report is likely to be the next major catalyst. Evidence of falling inventories could encourage stabilisation, while further stock accumulation would strengthen the bearish case.

For now, traders should focus on whether export demand can begin to absorb the available supply. Without a clearer improvement in the inventory position, any recovery may struggle to gain sustained momentum.

Today Markets Analysis

Palm oil is facing a significant supply-side challenge at a time when external market conditions are also turning less supportive. Record inventories, stronger Indonesian price competitiveness and falling crude oil prices have combined to push Malaysian futures towards their lowest levels since March.

Nevertheless, the sharp increase in October exports and India’s stronger import demand provide evidence that consumption remains active. The critical issue is whether these flows are sufficient to rebalance the market.

The November 10 Malaysian Palm Oil Board report should provide a clearer indication of the underlying supply-demand position and could determine whether the current decline extends or begins to stabilise.

Currency Hedger View

For international palm oil buyers and sellers, the recent weakness in commodity prices is only one part of the cost equation. Exchange-rate movements can also influence the final cost of purchasing, importing or exporting palm oil.

Importers should consider how movements in their domestic currency against the currencies used for settlement could affect purchasing costs, particularly when commodity prices are volatile. Exporters receiving foreign-currency payments may also benefit from reviewing their currency exposure to protect margins against adverse exchange-rate movements.

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Disclaimer

This article is provided for informational and market commentary purposes only. It does not constitute investment advice, financial advice, trading recommendations or an offer to buy or sell any financial instrument or commodity. Commodity prices can be volatile, and market conditions may change rapidly. Traders and businesses should conduct their own research and consider their individual risk exposure before making financial or commercial decisions.