On Friday (December 12), the last trading day of the week, Malaysian palm oil futures, the benchmark contract on the Bursa Malaysia Derivatives Exchange, failed to reverse its downward trend, recording a consecutive decline. By the close of trading at 6 PM Beijing time, the most active February contract fell 45 ringgit, or 1.11%, to settle at 4,018 ringgit per tonne. This not only marked the lowest closing price since November 25, but also brought the contract's cumulative weekly decline to 3.23%, ending two consecutive weeks of gains. The weakness clearly reflected the concentrated release of multiple short-term negative factors: a stronger Malaysian ringgit and declining prices of competing vegetable oils combined to exert downward pressure on the market today.

Dual pressure from domestic and international markets: the seesaw effect of exchange rates and price ratios

The core driving force behind the market that day stemmed primarily from changes in the external trading environment. The Malaysian ringgit, the currency used to price palm oil, strengthened by 0.37% against the US dollar during the trading session. A trader in Kuala Lumpur commented, "The weakness of competing oilseeds, coupled with the strengthening ringgit, jointly suppressed palm oil prices today." This precisely points to the two main sources of price pressure: firstly, exchange rate fluctuations directly increased the procurement cost of palm oil denominated in foreign currency, suppressing the demand interest of international buyers; secondly, the price performance of key competitors was also unsatisfactory. During the same period, the most actively traded soybean oil futures contract on the Dalian Commodity Exchange fell by 0.5%, while palm oil futures contracts fell even more sharply, reaching 1.27%. Soybean oil prices on the Chicago Board of Trade also recorded a decline. This synchronized decline stems from the competitive landscape of the global vegetable oil market, where price weakness in one sector is transmitted to the other through price comparisons.

Fundamental data also failed to provide support. Data from shipping surveyors showed that Malaysian palm oil exports from December 1st to 10th declined significantly compared to the same period last month. Specifically, AmSpec Agri Malaysia data showed a 10.3% decrease, while Intertek Testing Services data showed a 15% drop. This slowdown in export growth raised concerns about a potential rebound in month-end inventories, weakening the bullish sentiment previously fueled by expectations of tighter supply.

A mix of bullish and bearish factors: Biodiesel theme and policy trends provide potential support.

Despite a weak short-term trend, the market is not entirely without supporting factors. Volatility in the crude oil market introduces potential uncertainty into the demand outlook for palm oil as a biodiesel feedstock. While crude oil prices are likely to close lower overall this week, they rose on Friday due to concerns about supply disruptions in Venezuela. Higher crude oil prices theoretically enhance the cost competitiveness and economic attractiveness of palm oil in the biodiesel sector, and this long-term logic remains a significant floor support for palm oil prices.

Supply-side changes also warrant continued attention. Some market observers believe that recent developments in the competitive oilseed market may present structural opportunities for palm oil in the medium to long term. For example, a well-known institution, citing trader sources, reported that China's national grain reserve agency (Sinograin) sold off a large portion of its reserves in recent soybean auctions, a move seen as making room for subsequent arrivals of US soybeans. This reflects the current ample supply of oilseeds in some regions, putting short-term pressure on the overall edible oil market, including soybean oil; however, it can also be seen as a normal rotational operation under market mechanisms, and its long-term impact needs to be comprehensively assessed in conjunction with import schedules and end-consumer conditions. Analysts point out that any changes in the restocking pace or import policies of major consuming countries could potentially reshape global edible oil trade flows in the future, thereby altering the relative strengths and weaknesses of different commodities.

Institutional Perspective: Focus on Balancing Short-Term Pressures and Long-Term Logic

Currently, market analysts generally acknowledge short-term technical and fundamental pressures, but their views on the longer term are divided. Some cautious analysts believe that the temporary weakening of export data, the weakness of competing edible oils, and the volatility of the Malaysian Ringgit have collectively led to prices breaking below recent key support levels, and market sentiment needs time to recover. However, other analyses caution traders against excessive pessimism. They argue that the inherent production cycle of palm oil, the persistent benefits of biodiesel policies, and the slow pace of global vegetable oil inventory rebuilding are all deep-seated factors supporting prices. The current price correction may be more of a digestion of previous gains and a reaction to short-term negative news, rather than a fundamental reversal of the long-term trend. In the coming weeks, market focus will be on Malaysia's full-month December export data, month-end inventory estimates, and the purchasing policy moves of major importing countries. These data will verify whether the current demand weakness is temporary or a trend, thus indicating the next direction for prices. Traders need to carefully weigh the risks and opportunities between the short-term weakness and the expectation of a tight supply-demand balance in the long term.