Palm oil futures on the Bursa Malaysia Derivatives Exchange extended gains from the previous trading day on Thursday (January 8). The benchmark March contract closed at 4,042 ringgit per tonne, up 9 ringgit, or 0.22%, on the day. The market was supported by expectations of a possible increase in export taxes in Indonesia, but rising Malaysian inventories limited price gains.

Policy variables become the short-term focus

On January 8th, Indonesian Energy Ministry official Eniya Listiani Dewi publicly stated that the government is considering raising palm oil export taxes to ensure funding for the domestic biodiesel program. This statement directly boosted market sentiment. A trader based in Kuala Lumpur pointed out that this move is positive for Malaysian palm oil futures, but the market is still watching to see the specific increase. It is worth noting that Indonesia has already consumed 14.2 million kiloliters of palm oil-based biodiesel by 2025, a year-on-year increase of 7.6%, thanks to its mandatory B40 biodiesel blending policy. Furthermore, the Indonesian president's recent statement regarding the possible repossession of another 4 to 5 million hectares of palm plantations, combined with the biodiesel program, further strengthens expectations of medium- to long-term supply contraction. Analysts from well-known institutions believe that these measures may bring additional upward pressure on global palm oil prices.

Fundamental pressures should not be ignored.

Despite policy support, inventory pressure in producing regions is emerging. The Malaysian Palm Oil Association (MPOA) forecasts that Malaysian palm oil production in December 2025 will decrease by 4.64% month-on-month, significantly less than the market's previous expectation of 9%. If this data is officially confirmed, month-end inventory may exceed 3 million tons. The aforementioned Kuala Lumpur trader emphasized that this expectation is limiting the market's upward momentum. Meanwhile, the external vegetable oil market is showing divergent trends: the Dalian Commodity Exchange's soybean oil futures contract rose slightly by 0.2%, while the palm oil contract rose by 1.13%; the Chicago Board of Trade (CBOT) soybean oil price rose by 0.43% in tandem. Generally, palm oil prices follow the trends of other competing vegetable oils due to their market share competition in the global edible oil market.

Technology Structure and Market Outlook

From a price chart perspective, technical analysts from well-known institutions point out that if palm oil breaks through recent resistance, it may retest the December 30, 2025 high of 4102 ringgit per ton. However, the current market is characterized by a mix of bullish and bearish factors: policy expectations provide clear short-term upward momentum, but the real pressure of inventory rebuilding is equally evident. The next week will focus on two key developments: first, the specific magnitude and timetable of Indonesia's export tax adjustment; and second, the official inventory data to be released by the Malaysian Palm Oil Board (MPOB) on January 10. If inventory increases exceed expectations, the market may return to a volatile pattern; conversely, if policy implementation is strong, the price center is expected to move further upward.

Overall, the palm oil market is currently in a phase of interplay between policy-driven factors and fundamental realities. Traders need to be wary of the risk of a price correction after the priced-in rally has been fully priced in, while also paying attention to the potential impact of biodiesel policy implementation and weather changes in producing regions on the medium- to long-term supply side. Market volatility may increase, and flexibly seizing structural opportunities may be key in the near term.