On Friday, September 12, the most-traded palm oil contract (FCPOc3) on the Bursa Malaysia Derivatives Exchange (BMD) closed at 4,445 ringgit per ton, down 0.2% on the day and 0.07% on the week. Trading was cautious ahead of the long holiday, and technical indicators showed divergence, suggesting uncertainty about the short-term direction.

Holiday profit-taking and weak demand are short-term pressures

The palm oil market experienced high volatility this week. Friday's price decline was primarily driven by three factors: First, Malaysia's upcoming public holiday from September 15th to 16th prompted some long positions to close early and lock in profits; second, the ringgit appreciated 0.45% against the US dollar, weakening the competitiveness of dollar-denominated palm oil exports; and third, Malaysian palm oil inventories climbed to a 20-month high at the end of August, while exports from September 1st to 10th declined by 1.2% to 8.4% month-on-month, reflecting weak short-term demand, particularly from India.

Anilkumar Bagani, head of commodity research at Sunvin Group in Mumbai, pointed out: "The strengthening ringgit and the lack of new demand from major destinations (especially India) have suppressed prices, pushing the market into negative territory." This view directly points out the core contradiction of the current market.

Indonesian policies and long-term demand support remain

Despite short-term pressure, Indonesian policy developments offer potential support for the market. Local media reports indicate that Indonesian Energy Minister Bahlil Lahadalia may raise the mandatory blending ratio to B45 before implementing the B50 biodiesel plan. If implemented, this policy would significantly increase domestic palm oil consumption. Furthermore, the Indonesian government recently transferred 674,000 hectares of palm oil plantations to state-owned company Agrinas Palma Nusantara, bringing the total transferred area to 1.5 million hectares. This move aims to strengthen the country's supply chain management capabilities and could have long-term implications for global supply.

Divergence between technical and institutional views

Trading tended to be cautious before the long holiday, and technical indicators showed divergence: the MACD histogram was -13.58, but the fast and slow lines were still above the zero axis; the RSI (14) reading was 53.05, which was in the neutral range, suggesting that the short-term direction was unclear.

From a technical analysis perspective, renowned institutional technical analysts believe that palm oil contracts may continue their upward trend to 4,506 ringgit/ton, as the market is forming a flat consolidation pattern, suggesting the possibility of an upward breakout in the future. This assessment contrasts with the current short-term pressure on fundamentals, and cautions that if a breakthrough fails, the market may face the risk of a correction.

During the same period, performance of related oil and fat varieties varied: the main soybean oil contract on the Dalian Commodity Exchange rose 0.36%, while the palm oil contract edged up 0.24%. Soybean oil prices on the Chicago Board of Trade (CBOT) also rose 0.25%. This divergent performance reflects the overall tight supply and demand balance in the global vegetable oil market, but inter-variety substitution effects will continue to affect palm oil price elasticity.

Outlook: Post-holiday demand and policy implementation are key

In the coming week, market focus will shift to the recovery of post-holiday export data and the specific timeline for Indonesia's biodiesel policy. While short-term inventory pressures and monetary factors are weighing on the market, expanding biofuel demand and policy interventions in producing countries will continue to provide significant support in the medium and long term. Traders should closely monitor changes in Malaysia's export pace and macro capital flows in late September, as short-term volatility may further increase.