Malaysian palm oil futures fell for the second consecutive trading day on Thursday (August 7), with the benchmark October contract (FCPOc3) closing at 4,241 ringgit/ton, down 0.61%. Daily technical indicators show that the price is below the middle track of the Bollinger Band (4,491 ringgit), the MACD histogram is shrinking, and the RSI (14) remains in the neutral range of 57.14. The market may continue to fluctuate and weaken in the short term.

Fundamentals: Production and inventory pressures are prominent

Data from a reputable research firm indicates that Malaysia's palm oil exports fell 6.7%-9.6% month-over-month in July, with weak demand further exacerbating market concerns about inventory accumulation. David Ng, a dedicated account trader at Kuala Lumpur-based trading firm Iceberg X, noted, "The current market focus is on expectations of a seasonal recovery in production in the coming weeks. Combined with sluggish exports, this is putting significant short-term price pressure." The Malaysian Palm Oil Board (MPOB) will release official supply and demand data on August 11th. If inventories increase more than expected, this could reinforce bearish sentiment.

Indonesian policy developments also warrant attention. Although the country is negotiating tariff exemptions for certain goods with the US, starting August 7th, Indonesian exports to the US will face a 19% base tariff. Whether crude palm oil will be included in the exemption list remains unclear. If implemented, these tariffs could curb Indonesian exports to the US and indirectly impact Malaysian palm oil trade flows.

Related markets: oil and fat differentiation and crude oil fluctuations

External markets showed mixed performance. The main soybean oil contract on the Dalian Commodity Exchange rose slightly by 0.55%, while the palm oil contract fell slightly by 0.33%. Soybean oil prices on the Chicago Board of Trade (CBOT) fell by 0.52%. This divergence reflects the market's differing pricing of loose soybean supplies in South America and expectations of increased palm oil production in Southeast Asia.

Crude oil market fluctuations have limited impact on palm oil biodiesel. Although news of an upcoming meeting between Russian and US leaders briefly boosted the crude oil market, geopolitical uncertainty continues to constrain upward price momentum. If international oil prices continue to weaken, the demand premium for palm oil biodiesel could further weaken.

Institutional Views: Short-term bearishness and long-term variables

Some analysts remain cautious about the short-term outlook. A trading director at a futures firm in Kuala Lumpur noted, "Technical indicators suggest prices have not yet broken out of their downward trend. If the MPOB report confirms a rebound in inventories, a test of the 4,200 ringgit support level is possible." However, the slightly weakening ringgit against the US dollar (depreciating 0.07%) may provide marginal support for prices.

In the medium to long term, the impact of El Niño on palm oil yields in Southeast Asia remains a potential bullish factor. A Singapore-based agricultural product research firm believes, "If drought conditions persist in the third quarter, production may be limited in the first quarter of 2026, but current trading logic remains centered around spot supply and demand."

The palm oil market is facing a dual pressure from seasonal production increases and weak demand, and prices may continue to fluctuate in the short term. Investors should closely monitor MPOB data and the implementation of Indonesia's tariff policies, and be wary of potential price fluctuations caused by the opening of a window for weather speculation.