A new round of competition between bullish and bearish factors has begun, and palm oil is about to choose its direction.
2025-11-06 18:34:59
On Thursday (November 6), the Malaysian palm oil market rebounded from its gloom. The benchmark January contract closed at 4,149 ringgit per tonne, a rebound of 41 ringgit, or 1%, on the day. This rise ended the previous contract's decline to a 17-week low, and market sentiment gained a breather amid strong performance in domestic palm oil futures.
Today's market was clearly driven by the Chinese domestic market. The most active palm oil contract on the Dalian Commodity Exchange closed 1.32% higher, while soybean oil also rose 0.84%, providing direct upward momentum for the Malaysian market. A Kuala Lumpur trader noted, "The solid improvement in Dalian palm oil prices boosted Malaysian palm oil futures." This correlation is rooted in the competitive landscape of the global vegetable oil market, where palm oil prices must constantly monitor the movements of competitors such as soybean oil and rapeseed oil. Meanwhile, soybean oil prices on the Chicago Board of Trade rose 0.76%, further solidifying the short-term bullish sentiment in the vegetable oil sector. In the currency market, the ringgit strengthened by 0.19% against the US dollar, which typically weakens the attractiveness of ringgit-denominated palm oil exports, but today its negative impact was offset by a stronger overall sentiment in the vegetable oil market.
In addition to immediate price movements, the market is closely watching several potential changes that could reshape the medium- to long-term supply and demand landscape.
A key policy signal has emerged from South America. Brazil's Supreme Court has decided to suspend all legal proceedings regarding the "soybean moratorium" pending a final ruling. This private agreement, which began in 2006, aims to prevent soybean cultivation in deforestation areas of the Amazon rainforest. The uncertainty surrounding its legal status has long plagued Brazil's soybean industry's long-term supply expectations. While the Supreme Court's intervention has not yielded a final ruling, it has temporarily frozen the related legal disputes, providing the market with a brief period of policy observation. Any decision that favors maintaining or strengthening the agreement could constrain the potential for future expansion of Brazilian soybean acreage, thereby impacting global soybean oil supply and creating opportunities for the expansion of palm oil's market share.
In Asia, the oilseed production outlook in India, another major consumer, is noteworthy. Industry assessments indicate that India's rapeseed planting area is projected to reach a record high this year, driven by unprecedented purchases of rapeseed meal from China and favorable soil moisture from above-average rainfall. As the world's largest importer of vegetable oils, India's significant increase in domestic oilseed production could theoretically dampen its import demand for vegetable oils, particularly price-sensitive palm oil, in the coming months. This potential increase in domestic supply is a key variable that needs to be closely monitored in the coming months.
The current market rebound is largely seen as a technical correction driven by external markets, rather than a fundamental reversal. Analysts from well-known institutions believe the market is in a sensitive period with intertwined bullish and bearish factors. On the one hand, weather and policy uncertainties in South American producing regions, the uncertainty surrounding sunflower oil supply in the Black Sea region, and the potential seasonal decline in Southeast Asian palm oil production all contribute to potential price support. On the other hand, expectations of a bumper oilseed harvest in India, fluctuations in inventory levels in major importing countries, and the potential constraints on commodity demand from the global macroeconomic environment limit upside potential.
In summary, the palm oil market rebounded after hitting a key technical support level, supported by related markets. However, the sustainability and strength of this rally will depend on the substantial evolution of the aforementioned bullish and bearish factors. Traders should focus on the upcoming monthly supply and demand data from the Malaysian Palm Oil Board, real-time changes in India's vegetable oil import procurement pace, and further clarity regarding South American weather and policy developments. The market is likely to maintain high volatility in the short term, and a clearer fundamental signal is needed to drive a directional move.
Consecutive leading gains and correlation with external markets
Today's market was clearly driven by the Chinese domestic market. The most active palm oil contract on the Dalian Commodity Exchange closed 1.32% higher, while soybean oil also rose 0.84%, providing direct upward momentum for the Malaysian market. A Kuala Lumpur trader noted, "The solid improvement in Dalian palm oil prices boosted Malaysian palm oil futures." This correlation is rooted in the competitive landscape of the global vegetable oil market, where palm oil prices must constantly monitor the movements of competitors such as soybean oil and rapeseed oil. Meanwhile, soybean oil prices on the Chicago Board of Trade rose 0.76%, further solidifying the short-term bullish sentiment in the vegetable oil sector. In the currency market, the ringgit strengthened by 0.19% against the US dollar, which typically weakens the attractiveness of ringgit-denominated palm oil exports, but today its negative impact was offset by a stronger overall sentiment in the vegetable oil market.
New Fundamental Developments: South American Policies and Indian Planting
In addition to immediate price movements, the market is closely watching several potential changes that could reshape the medium- to long-term supply and demand landscape.
A key policy signal has emerged from South America. Brazil's Supreme Court has decided to suspend all legal proceedings regarding the "soybean moratorium" pending a final ruling. This private agreement, which began in 2006, aims to prevent soybean cultivation in deforestation areas of the Amazon rainforest. The uncertainty surrounding its legal status has long plagued Brazil's soybean industry's long-term supply expectations. While the Supreme Court's intervention has not yielded a final ruling, it has temporarily frozen the related legal disputes, providing the market with a brief period of policy observation. Any decision that favors maintaining or strengthening the agreement could constrain the potential for future expansion of Brazilian soybean acreage, thereby impacting global soybean oil supply and creating opportunities for the expansion of palm oil's market share.
In Asia, the oilseed production outlook in India, another major consumer, is noteworthy. Industry assessments indicate that India's rapeseed planting area is projected to reach a record high this year, driven by unprecedented purchases of rapeseed meal from China and favorable soil moisture from above-average rainfall. As the world's largest importer of vegetable oils, India's significant increase in domestic oilseed production could theoretically dampen its import demand for vegetable oils, particularly price-sensitive palm oil, in the coming months. This potential increase in domestic supply is a key variable that needs to be closely monitored in the coming months.
Institutional Views and Market Outlook
The current market rebound is largely seen as a technical correction driven by external markets, rather than a fundamental reversal. Analysts from well-known institutions believe the market is in a sensitive period with intertwined bullish and bearish factors. On the one hand, weather and policy uncertainties in South American producing regions, the uncertainty surrounding sunflower oil supply in the Black Sea region, and the potential seasonal decline in Southeast Asian palm oil production all contribute to potential price support. On the other hand, expectations of a bumper oilseed harvest in India, fluctuations in inventory levels in major importing countries, and the potential constraints on commodity demand from the global macroeconomic environment limit upside potential.
In summary, the palm oil market rebounded after hitting a key technical support level, supported by related markets. However, the sustainability and strength of this rally will depend on the substantial evolution of the aforementioned bullish and bearish factors. Traders should focus on the upcoming monthly supply and demand data from the Malaysian Palm Oil Board, real-time changes in India's vegetable oil import procurement pace, and further clarity regarding South American weather and policy developments. The market is likely to maintain high volatility in the short term, and a clearer fundamental signal is needed to drive a directional move.
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