Palm oil bears are "pressing on step by step"! With production rising and external weakness, can the bulls hold their line?
2025-07-28 19:16:05
On Monday (July 28), the main palm oil contract FCPOC3 of the Malaysian Derivatives Exchange (BMD) closed at 4239 ringgit/ton, down 34 ringgit (0.8%) on the day, falling for the second consecutive day. Technical indicators show that the price is still between the middle track (4182 ringgit) and the upper track (4372 ringgit) of the Bollinger channel, but the MACD bar is narrowing and the RSI (56.26) is neutral and strong, suggesting that the short-term upward momentum is weakening.
Production and inventory concerns emerge <br/>David Ng, a proprietary trader at Kuala Lumpur trading firm Iceberg X, pointed out: "The weakness of Dalian soybean oil and Chicago soybean oil in the Asian session dragged down the performance of palm oil, and market concerns about production recovery and inventory accumulation further suppressed prices." Malaysia's palm oil export data from July 1 to 25 was weak, and shipping agencies estimated a month-on-month decline of 9.2%-15.2%. Coupled with the seasonal production increase cycle, market expectations for rising inventories at the end of the month have increased.
External oil and fat markets are weak <br/>The main soybean oil contract (DBYcv1) of Dalian Commodity Exchange fell by 0.49%, and the palm oil contract (DCPcv1) fell by 0.42%; the soybean oil price (BOcv1) of Chicago Board of Trade (CBOT) also fell by 0.29%. Although international crude oil rebounded slightly, the strengthening of the US dollar and the weakening of India's import demand offset the support of biodiesel concept and weakened the substitution advantage of palm oil.
Some analysts believe that the current market contradictions are concentrated on the game between short-term supply pressure and long-term demand resilience. Data from well-known institutions show that the Malaysian ringgit has depreciated by 0.24% against the US dollar. Although it has improved the competitiveness of palm oil export prices, it has failed to offset the negative fundamentals. A Singapore oil and fat trader added: "If the production data in early August confirms a month-on-month increase, prices may fall to the psychological level of 4,000 ringgit."
Although the current trend is weak, potential variables still exist:
1. Weather disturbances in Southeast Asia: If the El Nino phenomenon causes drought in major producing areas, it may affect production in the second half of the year;
2. Biodiesel policy dynamics: Indonesia’s B40 plan and Malaysia’s expected adjustment of biodiesel blending ratio may reshape the long-term demand pattern.
Palm oil is constrained by loose supply and external market drag in the short term, but we need to be alert to technical repairs after oversold and potential positive policies. Traders should closely follow the August MPOB report and changes in weather models in major producing countries.
Supply and demand pressures dominate market sentiment
Production and inventory concerns emerge <br/>David Ng, a proprietary trader at Kuala Lumpur trading firm Iceberg X, pointed out: "The weakness of Dalian soybean oil and Chicago soybean oil in the Asian session dragged down the performance of palm oil, and market concerns about production recovery and inventory accumulation further suppressed prices." Malaysia's palm oil export data from July 1 to 25 was weak, and shipping agencies estimated a month-on-month decline of 9.2%-15.2%. Coupled with the seasonal production increase cycle, market expectations for rising inventories at the end of the month have increased.
External oil and fat markets are weak <br/>The main soybean oil contract (DBYcv1) of Dalian Commodity Exchange fell by 0.49%, and the palm oil contract (DCPcv1) fell by 0.42%; the soybean oil price (BOcv1) of Chicago Board of Trade (CBOT) also fell by 0.29%. Although international crude oil rebounded slightly, the strengthening of the US dollar and the weakening of India's import demand offset the support of biodiesel concept and weakened the substitution advantage of palm oil.
Institutional view: Short-term pressure and structural contradictions coexist
Some analysts believe that the current market contradictions are concentrated on the game between short-term supply pressure and long-term demand resilience. Data from well-known institutions show that the Malaysian ringgit has depreciated by 0.24% against the US dollar. Although it has improved the competitiveness of palm oil export prices, it has failed to offset the negative fundamentals. A Singapore oil and fat trader added: "If the production data in early August confirms a month-on-month increase, prices may fall to the psychological level of 4,000 ringgit."
Future focus: weather and policy variables
Although the current trend is weak, potential variables still exist:
1. Weather disturbances in Southeast Asia: If the El Nino phenomenon causes drought in major producing areas, it may affect production in the second half of the year;
2. Biodiesel policy dynamics: Indonesia’s B40 plan and Malaysia’s expected adjustment of biodiesel blending ratio may reshape the long-term demand pattern.
Palm oil is constrained by loose supply and external market drag in the short term, but we need to be alert to technical repairs after oversold and potential positive policies. Traders should closely follow the August MPOB report and changes in weather models in major producing countries.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
