The "paper tiger" moment of high palm oil inventories: Has the turning point arrived?
2025-11-10 19:10:17
On Monday (November 10), the benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed slightly higher amid fluctuations, but the overall market was almost stagnant. As of the close at 22:30 Beijing time, the January contract rose slightly by 2 ringgit to settle at 4111 ringgit per tonne, with a daily fluctuation of less than 0.1%. The market was stuck in a stalemate, supported by weak data from the Malaysian Palm Oil Board (MPOB) monthly report and pressured by declining exports in early November and a stronger ringgit.
The latest data from the Malaysian Palm Oil Board (MPOB) shows that Malaysian palm oil stocks have climbed for the eighth consecutive month, reaching a six-and-a-half-year high by the end of October. Although exports surged 16.4% to 1.47 million tons that month, production rose 11.3% to 1.97 million tons, a ten-year peak for the same period, leading to a further accumulation of stocks to 2.15 million tons. A trader in Kuala Lumpur noted that this data "only provides a mildly bullish tone," but the actual driving force in the market is limited.
More noteworthy is the significant weakness in preliminary export figures for the first 10 days of November. Data from independent inspection agencies shows that Malaysian palm oil product exports fell 9.5% to 12.3% month-on-month during this period, reflecting insufficient restocking momentum in major importing countries. Meanwhile, the ringgit appreciated 0.38% against the US dollar during the day, further diminishing the attractiveness of dollar-denominated goods.
In external markets, soybean oil futures on the Chicago Board of Trade rose 0.62%, the most active soybean oil futures contract on the Dalian Commodity Exchange closed 0.71% higher, and palm oil futures followed suit with a 0.12% increase. The strength of competing edible oils provided some price support for palm oil, but failed to fully offset its own fundamental pressures.
The energy market, however, is sending positive signals. Crude oil prices strengthened due to market expectations that the US government shutdown impasse was nearing a resolution, enhancing palm oil's competitiveness as a biodiesel feedstock. However, this positive factor has not yet translated into large-scale buying.
Analysts from well-known institutions point out that the core contradiction in the current market lies in "the continued expansion of supply and the uncertainty of demand." A researcher from a Southeast Asian plantation company emphasized, "If November production remains high while exports fail to improve, inventory pressure may force prices to test the psychological threshold of 4,000 ringgit." Another Singaporean trading company cautioned to pay attention to Chinese policy developments—Chinese customs announced that it would reinstate soybean import licenses for three US companies starting November 10th and lift import restrictions on US timber. This move may indirectly affect the flow of vegetable oil trade, but the specific effects still need to be observed in actual purchasing activity.
In the short term, the market needs to focus on the following variables: First, whether the export data for the whole of November can reverse the downward trend of the first half of the month, especially the purchasing pace of the two major buyers, India and China; second, whether the seasonal production reduction cycle in Southeast Asia will arrive as scheduled, as current meteorological models show that the inhibitory effect of El Niño on production may be delayed until the first quarter of 2026; and finally, the impact of energy market fluctuations on the economics of biodiesel blending, as a breakout of crude oil prices from the current range could trigger structural changes in industrial demand.
It is worth noting that while production cuts may support a price rebound in the long term, current inventory pressures and the monetary environment still pose upward resistance. Therefore, any optimistic forecast for future prices must be based on the premise of "inventory peaking" and "coordinated strengthening of external markets," both of which are indispensable.
The palm oil market is currently in a delicate balance between bullish and bearish forces. While the MPOB data did not trigger panic selling, the combination of high inventory and weak exports has firmly suppressed any potential for a rebound. Professional investors should be wary of the risk of a mismatch between the macroeconomic environment and the industry cycle, and remain cautious until the data is verified.
Fundamentals: High inventory levels and concerns about demand coexist.
The latest data from the Malaysian Palm Oil Board (MPOB) shows that Malaysian palm oil stocks have climbed for the eighth consecutive month, reaching a six-and-a-half-year high by the end of October. Although exports surged 16.4% to 1.47 million tons that month, production rose 11.3% to 1.97 million tons, a ten-year peak for the same period, leading to a further accumulation of stocks to 2.15 million tons. A trader in Kuala Lumpur noted that this data "only provides a mildly bullish tone," but the actual driving force in the market is limited.
More noteworthy is the significant weakness in preliminary export figures for the first 10 days of November. Data from independent inspection agencies shows that Malaysian palm oil product exports fell 9.5% to 12.3% month-on-month during this period, reflecting insufficient restocking momentum in major importing countries. Meanwhile, the ringgit appreciated 0.38% against the US dollar during the day, further diminishing the attractiveness of dollar-denominated goods.
Related Markets: The struggle between the edible oil sector and its energy attributes
In external markets, soybean oil futures on the Chicago Board of Trade rose 0.62%, the most active soybean oil futures contract on the Dalian Commodity Exchange closed 0.71% higher, and palm oil futures followed suit with a 0.12% increase. The strength of competing edible oils provided some price support for palm oil, but failed to fully offset its own fundamental pressures.
The energy market, however, is sending positive signals. Crude oil prices strengthened due to market expectations that the US government shutdown impasse was nearing a resolution, enhancing palm oil's competitiveness as a biodiesel feedstock. However, this positive factor has not yet translated into large-scale buying.
Policy Updates and Institutional Perspectives
Analysts from well-known institutions point out that the core contradiction in the current market lies in "the continued expansion of supply and the uncertainty of demand." A researcher from a Southeast Asian plantation company emphasized, "If November production remains high while exports fail to improve, inventory pressure may force prices to test the psychological threshold of 4,000 ringgit." Another Singaporean trading company cautioned to pay attention to Chinese policy developments—Chinese customs announced that it would reinstate soybean import licenses for three US companies starting November 10th and lift import restrictions on US timber. This move may indirectly affect the flow of vegetable oil trade, but the specific effects still need to be observed in actual purchasing activity.
Future Focus and Logical Deduction
In the short term, the market needs to focus on the following variables: First, whether the export data for the whole of November can reverse the downward trend of the first half of the month, especially the purchasing pace of the two major buyers, India and China; second, whether the seasonal production reduction cycle in Southeast Asia will arrive as scheduled, as current meteorological models show that the inhibitory effect of El Niño on production may be delayed until the first quarter of 2026; and finally, the impact of energy market fluctuations on the economics of biodiesel blending, as a breakout of crude oil prices from the current range could trigger structural changes in industrial demand.
It is worth noting that while production cuts may support a price rebound in the long term, current inventory pressures and the monetary environment still pose upward resistance. Therefore, any optimistic forecast for future prices must be based on the premise of "inventory peaking" and "coordinated strengthening of external markets," both of which are indispensable.
The palm oil market is currently in a delicate balance between bullish and bearish forces. While the MPOB data did not trigger panic selling, the combination of high inventory and weak exports has firmly suppressed any potential for a rebound. Professional investors should be wary of the risk of a mismatch between the macroeconomic environment and the industry cycle, and remain cautious until the data is verified.
- 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.
