On Thursday (October 16), the main palm oil contract on the Bursa Malaysia Derivatives Exchange closed at 4,518 ringgit per ton, a slight increase of 6 ringgit. This gain was hard-won, as the market initially faced downward pressure due to weak Indian demand and competition from soybean oil prices, but ultimately reversed course thanks to stronger crude oil prices and currency factors.

Demand-side pressure emerges, and structural differentiation intensifies

The latest data from the Solvent Extractors' Association of India (SEA) shows that the country's palm oil imports fell to a four-month low in September, while soybean oil imports climbed to a more than three-year high. This shift is directly due to the relative strength of soybean oil prices. Paramalingam Supramanyam, director of brokerage firm Perentin Bestari, noted that "cheaper soybeans and soybean oil are squeezing palm oil demand." Meanwhile, the main soybean oil contract on the Dalian Commodity Exchange rose slightly by 0.15%, while the palm oil contract fell by 0.04%. The price gap between domestic and foreign markets further highlights the pressure of demand diversion.

Crude oil and currency factors build bottom support

Despite negative demand factors, volatility in the crude oil market has provided resilience to palm oil. International oil prices are currently stable, and market expectations are growing that India may suspend Russian crude oil imports. If this happens, it will boost crude oil demand in other regions, indirectly enhancing palm oil's appeal as a biodiesel feedstock. Meanwhile, the ringgit appreciated 0.09% against the US dollar today. While this puts pressure on purchasing costs for overseas buyers, it also provides stability to the market from a monetary perspective.

Institutional view: Short-term pressure and long-term momentum coexist

Reputable analysts believe the palm oil market is currently locked in a "bull-bear tug-of-war." On the one hand, weakening Indian demand and the soybean oil substitution effect are already factored into prices; on the other, potential shifts in the crude oil market could reshape the linkage between the energy and vegetable oil markets. Paramalingam emphasized, "If crude oil prices continue to strengthen, the economics of biodiesel blending will significantly improve, potentially restructuring palm oil demand."

The current palm oil market presents a complex landscape of weak realities and strong expectations. Declining Indian imports and competition from soybean oil present unavoidable short-term headwinds, but crude oil market trends and the potential for biodiesel policies pose significant challenges in the medium and long term. Future trends will require careful attention to the impact of energy prices on marginal demand for vegetable oils and the impact of inventory changes in major producing countries on prices. With these multiple variables intertwined, market volatility is likely to increase further.