Contributor: Currency Hedger | Market Analysis: Louis Roche, Today Markets

Malaysian palm oil futures have retreated below MYR 4,600 per tonne as rising inventories, stronger production and weaker exports reinforce concerns over the market’s supply-demand balance. Pressure from competing edible oils in China and the United States, alongside lower crude oil prices, is also weighing on sentiment by reducing palm oil’s relative attractiveness as a biodiesel feedstock.

The latest Malaysian Palm Oil Board (MPOB) figures point to a substantial build-up in available supplies, with September inventories reaching a record 3.51 million tonnes. However, stronger export shipments at the start of October could provide a degree of support if the improvement continues. Traders are also monitoring China’s upcoming inflation and trade data for indications of demand in one of the world’s key consuming markets.

Palm Oil Market Snapshot

Fundamental Drivers: Rising Stocks Keep Pressure on Prices

Record inventories reinforce the bearish outlook

Malaysian palm oil inventories rose 24.5% month-on-month in September to 3.51 million tonnes, extending the increase for a sixth consecutive month. The record stockpile highlights the challenge facing the market as production continues to outpace the pace of export demand.

Elevated inventories can weigh on prices by increasing the volume of supply available to buyers and reducing the urgency to secure additional cargoes. Unless exports accelerate sufficiently to absorb the surplus, stocks may remain a central source of downward pressure over the coming sessions.

The key question is whether the market is approaching a turning point in inventory accumulation or whether rising production will continue to outstrip demand. Further stock increases would strengthen the bearish case, while evidence of sustained inventory drawdowns could improve sentiment.

Production reaches its highest level since 2015

Malaysian palm oil production climbed 16.5% in September to 2.12 million tonnes, its highest level since August 2015. The increase adds to the supply pressure and makes a sustained price recovery more difficult unless demand improves.

Seasonal production patterns remain important, but the market will need to see whether output begins to moderate as the year progresses. If production stays elevated while exports remain subdued, the resulting supply surplus could keep futures under pressure.

Conversely, any slowdown in output or disruption to harvesting could help rebalance the market, particularly if export demand strengthens at the same time.

Exports decline for a second consecutive month

Malaysian palm oil exports fell 12.1% in September to 1.12 million tonnes, marking a second consecutive monthly decline. The weakness is significant because export demand is a key mechanism through which Malaysia reduces domestic inventories.

However, early October data provide a more encouraging signal. Cargo surveyors estimate that Malaysian palm oil product exports rose between 33.5% and 37.7% month-on-month during October 1–10.

If confirmed and sustained, this improvement could help absorb some of the excess supply and limit further price declines. Nevertheless, the early-month figures cover a relatively short period and should not yet be treated as evidence of a lasting recovery in demand.

The coming sessions will reveal whether the stronger shipment pace continues or whether September’s weakness remains representative of the broader export trend.

Competing edible oils and crude oil add pressure

Palm oil futures are also facing competition from weaker edible-oil markets in Dalian and Chicago. Price movements in competing oils can influence substitution decisions among food manufacturers and other industrial buyers, affecting the relative attractiveness of palm oil.

Lower crude oil prices are another headwind. When fossil-fuel prices decline, the economics of using vegetable oils as biodiesel feedstock can become less favorable, depending on policy incentives, blending mandates and production costs.

If crude oil remains weak and competing edible oils continue to struggle, palm oil could face additional pressure beyond the domestic Malaysian supply surplus. A recovery in energy prices or competing vegetable oils, however, could help improve sentiment.

China’s economic data could influence demand expectations

China’s upcoming inflation and trade data are likely to attract attention as investors assess the outlook for consumption and import demand.

Stronger economic indicators could support expectations for improved buying activity, while weaker figures may reinforce concerns about demand for edible oils and related commodities.

The effect on palm oil prices will depend not only on China’s headline economic performance but also on actual purchasing activity, relative prices and competition from alternative oils.

Technical Outlook: MYR 4,600 Is the Immediate Reference Level

Palm oil futures have moved below MYR 4,600 per tonne, placing attention on whether this level becomes resistance or whether prices can reclaim it.

The available market information does not provide verified chart-based support or resistance levels beyond the current price reference. Traders should confirm recent swing lows, highs and momentum indicators against a current chart before assigning precise technical targets.

Bearish scenario

If prices remain below MYR 4,600, inventories continue to rise and export demand fails to sustain its early October improvement, futures could remain vulnerable to further weakness.

Continued pressure from competing edible oils and lower crude oil prices would reinforce this scenario. A renewed decline in export shipments would also suggest that the market is struggling to absorb the available supply.

Bullish scenario

A sustained recovery in Malaysian exports could help reduce inventory pressure and support a rebound. If futures reclaim MYR 4,600 and stronger shipments are followed by evidence of improving demand, market sentiment may begin to stabilise.

Higher crude oil prices or a recovery in competing edible oils could provide additional support, particularly if Malaysian production begins to moderate.

Neutral scenario

Prices could consolidate around current levels if record inventories limit buying interest while stronger early October exports discourage aggressive selling.

In this scenario, traders are likely to await further monthly data and confirmation of whether recent export gains translate into a meaningful improvement in the supply-demand balance.

Palm Oil Price Forecast: Outlook for the Coming Sessions

The near-term outlook remains cautious to bearish, with record inventories and strong production outweighing the initial signs of an export recovery.

The most important indicator will be whether the stronger export pace recorded during the first ten days of October continues. A sustained improvement could help reduce the stock overhang, but one early-month reading is not enough to confirm that the market has entered a durable recovery.

The key factors to monitor are:

• Inventory trends: Further increases would reinforce concerns over excess supply, while a sustained decline could support prices.
• Export demand: Continued strength in October shipments could help absorb Malaysian production and limit losses.
• Production levels: Any moderation in output could improve the supply-demand balance.
• Crude oil and competing edible oils: Relative price movements will influence palm oil’s attractiveness in food and biodiesel markets.
• Chinese economic data: The latest figures could influence expectations for demand, although actual purchasing trends will remain crucial.

Unless demand improves enough to offset the elevated supply, rallies may struggle to gain traction. However, if October exports remain strong and inventory growth begins to slow, the market could stabilise despite the currently bearish fundamentals.

For now, MYR 4,600 per tonne remains an important reference level, while confirmation of a broader trend change will require clearer evidence that the supply surplus is beginning to ease.

Analysis — Louis Roche, Today Markets

Palm oil is facing a supply-led market challenge. Record Malaysian inventories, stronger production and two consecutive months of declining exports have created a difficult backdrop for prices. The market is not short of supply; the central question is whether demand can accelerate quickly enough to absorb it.

The early October export figures offer a potential counterweight to the bearish outlook, but they need to be confirmed by sustained shipment growth and subsequent inventory data. If exports improve while production moderates, the market could begin to rebalance. If production remains elevated and shipments lose momentum, further price weakness remains possible.

I would therefore focus on the next evidence of inventory stabilisation rather than treating stronger early-month exports as confirmation of a recovery. The balance of risks remains tilted to the downside while prices trade below MYR 4,600 and the stock overhang persists, although developments in energy markets and competing vegetable oils could quickly alter the outlook.

Currency Hedger View

Palm oil price movements can affect producers, processors, exporters and food manufacturers with international supply chains. Changes in commodity prices and exchange rates can influence procurement costs, export revenues and profit margins, particularly for businesses trading across currencies.

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Disclaimer

This article is for informational and educational purposes only and does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument or commodity. Commodity markets can be volatile, and forecasts may not materialise. Market participants should conduct their own research and assess their risk tolerance before making trading or investment decisions.