On Tuesday (November 25), the Malaysian palm oil market continued its recent downward trend, with the benchmark February contract closing at 3,990 ringgit per tonne, a drop of 65 ringgit or 1.6% on the day, marking the fourth consecutive trading day of decline. The market was shrouded in multiple negative factors: weak performance of related vegetable oil commodities on the Dalian Commodity Exchange, persistently weak Malaysian export data, and a strengthening ringgit exchange rate all contributed to the downward pressure on prices.

The supply and demand fundamentals are showing signs of weakening.

The market's current focus is on Malaysia's export performance. Latest data from renowned institutions AmSpec Agri and Intertek Testing Services shows that from November 1st to 22nd, Malaysian palm oil product exports declined by 16.4% to 18.8% compared to the same period last month. This significant drop indicates weakening global demand momentum, particularly a slowdown in purchasing by major importing countries. Meanwhile, the market is assessing the impact of floods in northern Malaysia on production. A Kuala Lumpur trader noted, "Currently, palm oil futures are trading within a narrow range, closely following the Dalian market. Although the torrential rains have affected more than 11,000 people in seven states, the impact is still concentrated in the north." This means the impact of the floods on overall national production is currently limited.

Related market and monetary factors dragged down

The weakness in external markets further exacerbated the pressure on palm oil. As of the evening of the 25th Beijing time, the main soybean oil contract on the Dalian Commodity Exchange fell 0.37%, while palm oil futures fell by 1.69%. Soybean oil prices on the Chicago Board of Trade also declined by 0.59%. The weakness in these competing vegetable oils reduced the relative attractiveness of palm oil, as traders typically compare values among these substitutes. Currency factors also had an adverse impact, with the Malaysian ringgit strengthening 0.22% against the US dollar that day, making dollar-denominated palm oil more expensive for overseas buyers.

Institutional Views and Market Outlook

Market participants remain cautious about the future direction. The aforementioned Kuala Lumpur trader emphasized that "traders are currently reassessing the flood situation," suggesting that weather factors may be a key variable influencing market sentiment in the short term. Although the floods have not yet caused substantial damage to national production, a continued escalation of the disaster could alter future supply expectations.

From a broader perspective, the market is currently in a demand-driven adjustment phase. The significant decline in export data reflects seasonal adjustments in global purchasing patterns and weakened demand for inventory rebuilding. While prices are constrained by weak fundamentals in the short term, several key factors need close monitoring: whether the flooding in Malaysia will spread to major producing areas, policy moves by major importing countries such as India, and the potential impact of crude oil price fluctuations on biodiesel demand. Any changes in these variables could be a catalyst for breaking the current weak trend.