Palm oil futures have seen two consecutive monthly declines, and the 4200 ringgit support level is being tested.
2025-10-31 18:35:21
On Friday (October 31), the most active palm oil contract on the Malaysian Derivatives Exchange closed at 4,205 ringgit per tonne, down 1.29% on the day and 3.38% for the month, marking the second consecutive month of decline. The market fluctuated downwards under the dual pressure of weak palm oil futures and a stronger ringgit. Although export data showed a slight increase, it was insufficient to offset the drag from the macroeconomic environment and related markets.
The dominant factor driving the market today clearly points to weakness in vegetable oil futures on the Dalian Commodity Exchange (DCE). The DCE's most active soybean oil contract fell 0.25%, while palm oil futures declined by 0.63%, and soybean oil prices on the Chicago Board of Trade also dipped slightly by 0.1%. This correlation stems from the competitive landscape of the global vegetable oil market, where palm oil prices are often influenced by the movements of substitute oils. A Kuala Lumpur trader noted, "Market sentiment today was dominated by the decline in palm oil futures on the Dalian Commodity Exchange, with significantly insufficient buying momentum."
Meanwhile, the ringgit appreciated by 0.26% against the US dollar, further diminishing the import appeal of dollar-denominated palm oil. Cost pressures are mounting for buyers holding non-ringgit currencies.
Malaysian palm oil exports rose 4.3% month-on-month in October to 1.502 million tons, showing signs of recovery, but failing to effectively boost market confidence. Indonesia, another key oil producer, slightly adjusted its November crude palm oil reference price to $963.75 per ton, a slight increase from the previous month, reflecting the major producing country's intention to maintain a price floor.
However, potential pressures on the supply side cannot be ignored. The anticipated bumper soybean harvest in South America and the supply prospects for the new North American crop are reshaping the global edible oil balance. Recently, US soybean futures hit a 15-month high due to market rumors that China has pledged to purchase tens of millions of tons of US agricultural products over the next few years. This development could intensify competition between soybean oil and palm oil, especially given the diversification of vegetable oil consumption patterns in China.
Several well-known institutions have differing opinions on the market outlook. Some analysts believe that current prices have already reflected short-term negative factors, and the resilience of exports from major producing countries and the expansion of biodiesel demand will provide bottom support. Others emphasize that the pace of global inventory rebuilding and energy price volatility remain key variables: "If crude oil prices remain high, palm oil's cost advantage in the biofuel sector will become more prominent again."
It's worth noting that a senior industry consultant pointed out, "The market is testing the support level of the 4000-4200 ringgit range. If production data in the next month does not show unexpected growth, prices are expected to stabilize and rebound from current levels." This assessment echoes the current technical trend.
Despite a bearish short-term market sentiment, a potential turning point is brewing. Policy adjustments in major producing countries, the potential impact of El Niño on 2026 production, and the pace of global renewable energy policy implementation could all be catalysts for disrupting the current balance. Professional traders should be wary of a divergence between fundamentals and market sentiment—when prices are deeply discounted from fundamentals, any marginal improvement could trigger a corrective rally.
The market is currently in a transitional period between old and new drivers. It is recommended to closely monitor the inventory turnover efficiency in production areas and the flow of macro funds, as these two factors may determine the magnitude and direction of price fluctuations in the next stage.
External market transmission and exchange rate pressure
The dominant factor driving the market today clearly points to weakness in vegetable oil futures on the Dalian Commodity Exchange (DCE). The DCE's most active soybean oil contract fell 0.25%, while palm oil futures declined by 0.63%, and soybean oil prices on the Chicago Board of Trade also dipped slightly by 0.1%. This correlation stems from the competitive landscape of the global vegetable oil market, where palm oil prices are often influenced by the movements of substitute oils. A Kuala Lumpur trader noted, "Market sentiment today was dominated by the decline in palm oil futures on the Dalian Commodity Exchange, with significantly insufficient buying momentum."
Meanwhile, the ringgit appreciated by 0.26% against the US dollar, further diminishing the import appeal of dollar-denominated palm oil. Cost pressures are mounting for buyers holding non-ringgit currencies.
Contradictory signals from supply and demand data
Malaysian palm oil exports rose 4.3% month-on-month in October to 1.502 million tons, showing signs of recovery, but failing to effectively boost market confidence. Indonesia, another key oil producer, slightly adjusted its November crude palm oil reference price to $963.75 per ton, a slight increase from the previous month, reflecting the major producing country's intention to maintain a price floor.
However, potential pressures on the supply side cannot be ignored. The anticipated bumper soybean harvest in South America and the supply prospects for the new North American crop are reshaping the global edible oil balance. Recently, US soybean futures hit a 15-month high due to market rumors that China has pledged to purchase tens of millions of tons of US agricultural products over the next few years. This development could intensify competition between soybean oil and palm oil, especially given the diversification of vegetable oil consumption patterns in China.
Institutional Perspective: Divergence and Focus
Several well-known institutions have differing opinions on the market outlook. Some analysts believe that current prices have already reflected short-term negative factors, and the resilience of exports from major producing countries and the expansion of biodiesel demand will provide bottom support. Others emphasize that the pace of global inventory rebuilding and energy price volatility remain key variables: "If crude oil prices remain high, palm oil's cost advantage in the biofuel sector will become more prominent again."
It's worth noting that a senior industry consultant pointed out, "The market is testing the support level of the 4000-4200 ringgit range. If production data in the next month does not show unexpected growth, prices are expected to stabilize and rebound from current levels." This assessment echoes the current technical trend.
Future Path: Focus on Structural Transformation
Despite a bearish short-term market sentiment, a potential turning point is brewing. Policy adjustments in major producing countries, the potential impact of El Niño on 2026 production, and the pace of global renewable energy policy implementation could all be catalysts for disrupting the current balance. Professional traders should be wary of a divergence between fundamentals and market sentiment—when prices are deeply discounted from fundamentals, any marginal improvement could trigger a corrective rally.
The market is currently in a transitional period between old and new drivers. It is recommended to closely monitor the inventory turnover efficiency in production areas and the flow of macro funds, as these two factors may determine the magnitude and direction of price fluctuations in the next stage.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
