The Malaysian palm oil futures market continued its decline on Wednesday (October 22), closing lower for the third consecutive trading day. Significantly dragged down by weak prices for competing vegetable oils in Dalian, the benchmark January contract, FCPOC3, closed at 4,454 ringgit per ton, a sharp drop of 51 ringgit, or 1.13%. Intraday price fluctuations clearly reflect the current market's lack of internal driving logic and its dependence on external market sentiment.

The linkage effect continues to exert pressure

The vegetable oil sector on the Dalian Commodity Exchange was the primary driver of the market decline that day, with the main soybean oil contract falling 0.99% and the palm oil contract falling even more, by 1.69%. In contrast, soybean oil prices on the Chicago Board of Trade rose slightly by 0.3%. This regional divergence highlights the palm oil market's high sensitivity to short-term correlated commodities.

A Kuala Lumpur trader directly pointed out the market status: "Futures are currently following the weak trend of the Dalian market, while waiting for new guidance to drive the market." This view accurately summarizes the passive structure of the current market - in the absence of internal core drivers, investors are more inclined to look for directions from related markets.

The fundamentals show a mixed trend of bullish and bearish

Despite the weak price trend, fundamental data is not entirely without bright spots. Indonesian Energy Minister Bahlil Lahadalia announced that biodiesel consumption reached 10.57 million kiloliters from January to September this year, a nearly 10% increase from 9.61 million kiloliters in the same period last year. This data confirms that biofuel demand is strongly supporting palm oil consumption.

Exports also showed modest improvement. Data from shipping research firm Intertek Testing Services showed a 3.4% month-on-month increase in Malaysian palm oil exports from October 1 to 20, while statistics from independent inspection firm AmSpec Agri Malaysia showed a 2.5% increase. While the growth rate was limited, it at least suggests that demand hasn't deteriorated significantly.

Supporting factors are emerging and ready to take effect

The Malaysian Palm Oil Council made it clear on Tuesday that amid uncertainties in the export outlook for palm oil and soybean oil, crude palm oil prices are expected to remain above 4,400 ringgit per ton until 2026. This official forecast provides the market with a clear price bottom line reference.

Meanwhile, the external environment is potentially positive. Crude oil prices continued their rebound on Wednesday, rising approximately 2%, closing higher for the second consecutive day. Stronger crude oil futures have enhanced the economic appeal of palm oil as a biodiesel feedstock, though this positive factor has yet to be fully reflected in the current market. The ringgit, trading currency, fell slightly by 0.05% against the US dollar, also providing a certain cost advantage for overseas buyers.

Market Outlook: Waiting for internal drivers to form

The current market is in a typical "follower" mode, with fluctuations in the Dalian market becoming the dominant factor in short-term prices. Although growing biodiesel consumption and recovering exports provide fundamental support, market confidence is clearly insufficient, and a stronger catalyst is needed to break the current downward inertia.

From a technical perspective, prices are gradually approaching the key psychological support level of 4,400 ringgit. If this level can be effectively defended, coupled with the continued recovery in the crude oil market, palm oil may find some respite. However, a significant market reversal still requires the emergence of new fundamental drivers or a fundamental shift in the external market environment.