On Tuesday (October 28), the main palm oil contract on the Bursa Malaysia Derivatives Exchange closed at 4,315 ringgit per ton, down 1.33% and hitting a nearly 12-week low. After three consecutive days of decline, the market's weakening trend has become even more pronounced.

External market drag and currency pressure

This round of decline was primarily driven by related market and currency factors. Dalian Commodity Exchange soybean oil futures fell 0.53% on the day, while palm oil futures dropped 1.67%. Chicago Board of Trade soybean oil prices also fell 0.37%. As a major competitor in the global vegetable oil market, palm oil prices continue to strengthen in correlation with these alternative oils. Meanwhile, the ringgit appreciated 0.24% against the US dollar, weakening palm oil's appeal to overseas buyers. A Kuala Lumpur trader noted, "The continued weakness in Dalian palm oil fraction prices, coupled with the strengthening ringgit, has suppressed crude palm oil pricing."

Supply-side expansion expectations

The Indonesian Palm Oil Association (GAPKI) released its latest forecast on October 28th, predicting that Indonesia's palm oil production could climb to approximately 56 million tons in 2025, exceeding previous estimates. The association emphasized that favorable weather conditions and a consistently positive price environment supported the production increase. This data has fueled market concerns about loose global supply, further dampening bullish sentiment.

Energy market transmission effect

International crude oil prices fell another 2% on Tuesday, extending their decline to three consecutive trading days. Despite US sanctions on two major Russian oil companies, market concerns that OPEC+ might proceed with its production increase plan have put pressure on oil prices. Weaker crude oil prices have weakened the economic viability of palm oil as a biodiesel feedstock, constraining demand expectations.

Institutional Views and Market Outlook

Some analysts believe that current prices have already partially reflected negative factors, but a short-term recovery depends on stabilization of external markets. A leading institution noted, "If the crude oil and soft oil markets fail to halt their decline, palm oil's biodiesel demand and price competitiveness will continue to be tested." However, others emphasize that Southeast Asia's seasonal production cuts are approaching, and current prices may stimulate purchasing demand, necessitating close monitoring of inventory data and policy developments.

Overall, the palm oil market is experiencing a fierce battle between bullish and bearish factors. In the short term, the trends of related oils and fats, the ringgit exchange rate, and crude oil dynamics remain key price drivers. In the medium and long term, attention must be paid to the actual evolution of the supply and demand balance sheet in producing regions. Market participants must be vigilant to the risk of rising volatility and flexibly respond to the dual impacts of fundamentals and financial attributes.