On Friday (August 15), the main palm oil contract FCPOc3 on the Bursa Malaysia Derivatives Exchange (BMD) closed at 4,478 ringgit/ton, up 1.7% on the day and 5.24% on the week, the largest weekly gain in nearly two months. Technically, the price broke through the middle Bollinger Band (4,161 ringgit), but the MACD histogram remained below the zero axis, and the RSI (14) was at 48.84, indicating that although the market has strengthened in the short term, the medium-term momentum has not yet fully reversed.

Export data ignites bullish sentiment

This week's market performance was primarily driven by an unexpected rebound in export data for the first half of August. Shipping surveys AmSpec Agri and Intertek reported month-over-month increases of 21.3% and 16.5%, respectively, significantly alleviating market concerns about weakening demand. Notably, India's palm oil imports declined in July due to contract cancellations, but soybean oil imports surged to a three-year high, reflecting the direct impact of price competition on trade flows. Despite short-term fluctuations in Indian demand, the rebound in Southeast Asian exports continues to instill confidence in the market.

Policy variables disturb supply expectations

On August 15, Indonesian President Prabowo Subianto announced a crackdown on 3.7 million hectares of illegal oil palm plantations, representing approximately 15% of the country's total planted area. If strictly enforced, this policy could curb production over the next 6-12 months. However, analysts at leading institutions noted that "there are uncertainties regarding the effectiveness of Indonesian law enforcement, and current inventory levels remain at historically high levels, limiting the short-term impact." Furthermore, international crude oil prices weakened on Friday, with New York crude futures falling 1.2%, weakening the support for palm oil from biodiesel demand.

Competitive oils and fats and exchange rate factors

Across markets, soybean oil futures (DBYcv1) on the Dalian Commodity Exchange fell slightly by 0.19%, while palm oil contracts (DCPcv1) rose slightly by 0.11%. The price differential structure suggests that palm oil still offers a competitive price-performance ratio. Chicago Board of Trade (CBOT) soybean oil prices rebounded by 0.33%, but the discount to palm oil remains over $100 per ton, suggesting continued demand for alternatives. Regarding currencies, the ringgit depreciated by 0.17% against the US dollar, further enhancing the export competitiveness of Malaysian palm oil.

Institutional views diverge

Some traders believe the current rebound is primarily due to short-covering. An analyst at a multinational trading firm stated, "The export recovery is overestimated. Shipping may slow in the second half of August, and Indian inventory rebuilding has yet to begin." However, bullish analysts emphasize supply-side risks, arguing, "If Indonesian policies continue to tighten, coupled with the end of Malaysia's seasonal production increase, supply and demand may shift to a tight balance in Q4," according to the commodities team at an Asian bank.

Market Outlook

In the short term, prices face technical resistance at the 4,500 ringgit mark, but a break above the 4,180-4,200 range (the upper Bollinger Band and the previous high) could open up further upside potential. In the medium and long term, two key variables warrant vigilance: the overall pressure on the oil and fats sector from the upcoming northern hemisphere oilseed harvest season, and the effectiveness of Indonesian policy implementation and the timing of production losses. Market participants should closely monitor the next round of export data and crude oil market fluctuations after August 20th.