Palm oil prices are approaching a 17-week low. Could the MPOB data be the final straw that breaks the camel's back?
2025-11-05 18:52:24
On Wednesday (November 5), the most active palm oil contract on the Malaysian Derivatives Exchange closed at 4,109 ringgit per tonne, down 0.82% on the day, hitting a nearly 17-week low. The market awaits a breakthrough in key data releases this week amidst a continuous decline.
The core pressure driving this round of price declines stems from a shift towards a more relaxed fundamental environment. Malaysian palm oil stocks are projected to climb to 2.44 million tons in October, a two-year high, while production may reach a seven-year peak. A trader in Kuala Lumpur noted, "Although prices briefly stabilized in the afternoon, concerns about high inventory levels continue to limit any rebound." If this data is confirmed in the MPOB report on November 10th, it will confirm a substantial increase in supply pressure.
Meanwhile, demand is showing signs of divergence. India's palm oil imports fell to a five-month low in October, and total purchases for the 2024-25 marketing year even hit a five-year low. Due to the rapid rise in palm oil prices earlier, buyers shifted to increasing soybean oil purchases, and this structural shift is hindering the reduction of palm oil inventories.
External markets also failed to provide effective support. The main soybean oil contract on the Dalian Commodity Exchange fell slightly by 0.05%, palm oil futures dropped 0.72%, and while soybean oil prices on the Chicago Board of Trade rebounded by 0.73%, this failed to reverse the overall weakness in the edible oil market. As a competitive commodity in the global vegetable oil trade, the price difference between palm oil and soybean oil and rapeseed oil directly affects export competitiveness.
The currency environment was also unfavorable. The ringgit appreciated 0.14% against the US dollar that day, weakening the appeal of Malaysian palm oil to overseas buyers. If the US dollar continues to strengthen against the ringgit, a deeper price reduction may be needed to stimulate a demand recovery.
Many institutions believe that the market has already partially priced in high inventory expectations, and the focus has shifted to the actual value of MPOB data and the extent to which the seasonal production reduction cycle is realized. A well-known institution's analysis points out: "If the inventory increase is lower than expected, or if purchasing plans in India and China unexpectedly rebound, prices may see a technical correction." However, some also caution that if production remains high and exports fail to keep pace, inventory pressure will continue until the end of the year.
It is worth noting that the implementation of biodiesel policies in Indonesia and Malaysia is a potential variable. If the progress of the B35 and B20 programs exceeds expectations, it may alleviate some supply pressure through the expansion of domestic consumption, but this effect needs time to be verified.
In the short term, the market is caught in a tug-of-war between "weak reality" and "expectation gap." On the one hand, the current situation of high production season and weak exports is unlikely to be reversed quickly; on the other hand, after continuous price declines, prices have reached some cost support levels, and short positions need to guard against the risk that all the negative data has been priced in.
The medium- to long-term outlook depends on three key factors: first, whether the production cuts during the Southeast Asian rainy season can offset current inventory pressure; second, whether India and China will resume their pre-Chinese New Year stockpiling efforts; and finally, the transmission effect of crude oil price fluctuations on biodiesel demand. Investors should be wary that if the macroeconomic environment and supply-demand improvements fail to resonate, the upside potential may be limited.
The supply and demand dynamics have shifted to a more relaxed state.
The core pressure driving this round of price declines stems from a shift towards a more relaxed fundamental environment. Malaysian palm oil stocks are projected to climb to 2.44 million tons in October, a two-year high, while production may reach a seven-year peak. A trader in Kuala Lumpur noted, "Although prices briefly stabilized in the afternoon, concerns about high inventory levels continue to limit any rebound." If this data is confirmed in the MPOB report on November 10th, it will confirm a substantial increase in supply pressure.
Meanwhile, demand is showing signs of divergence. India's palm oil imports fell to a five-month low in October, and total purchases for the 2024-25 marketing year even hit a five-year low. Due to the rapid rise in palm oil prices earlier, buyers shifted to increasing soybean oil purchases, and this structural shift is hindering the reduction of palm oil inventories.
Related market and monetary factors exert pressure
External markets also failed to provide effective support. The main soybean oil contract on the Dalian Commodity Exchange fell slightly by 0.05%, palm oil futures dropped 0.72%, and while soybean oil prices on the Chicago Board of Trade rebounded by 0.73%, this failed to reverse the overall weakness in the edible oil market. As a competitive commodity in the global vegetable oil trade, the price difference between palm oil and soybean oil and rapeseed oil directly affects export competitiveness.
The currency environment was also unfavorable. The ringgit appreciated 0.14% against the US dollar that day, weakening the appeal of Malaysian palm oil to overseas buyers. If the US dollar continues to strengthen against the ringgit, a deeper price reduction may be needed to stimulate a demand recovery.
Institutional Viewpoint: Focus on the Linkage Between Data and Policy
Many institutions believe that the market has already partially priced in high inventory expectations, and the focus has shifted to the actual value of MPOB data and the extent to which the seasonal production reduction cycle is realized. A well-known institution's analysis points out: "If the inventory increase is lower than expected, or if purchasing plans in India and China unexpectedly rebound, prices may see a technical correction." However, some also caution that if production remains high and exports fail to keep pace, inventory pressure will continue until the end of the year.
It is worth noting that the implementation of biodiesel policies in Indonesia and Malaysia is a potential variable. If the progress of the B35 and B20 programs exceeds expectations, it may alleviate some supply pressure through the expansion of domestic consumption, but this effect needs time to be verified.
Future Path: Where are the Signals for a Breakthrough?
In the short term, the market is caught in a tug-of-war between "weak reality" and "expectation gap." On the one hand, the current situation of high production season and weak exports is unlikely to be reversed quickly; on the other hand, after continuous price declines, prices have reached some cost support levels, and short positions need to guard against the risk that all the negative data has been priced in.
The medium- to long-term outlook depends on three key factors: first, whether the production cuts during the Southeast Asian rainy season can offset current inventory pressure; second, whether India and China will resume their pre-Chinese New Year stockpiling efforts; and finally, the transmission effect of crude oil price fluctuations on biodiesel demand. Investors should be wary that if the macroeconomic environment and supply-demand improvements fail to resonate, the upside potential may be limited.
- 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.
