On Tuesday (January 13), palm oil futures on the Bursa Malaysia Derivatives Exchange (BMD) closed higher for the second consecutive trading day. The benchmark contract price held steady above 4,100 ringgit per tonne, showing a firm upward trend throughout the session. This rise was supported by both stronger competing vegetable oils and positive export data at the beginning of the month, providing some respite for market sentiment after the high inventory levels at the end of last year.



The direct driving force behind today's market performance stems from optimistic export data. According to data from a well-known research institution, Malaysian palm oil product exports saw a significant increase from January 1st to 10th compared to the same period last month, with growth ranging from 17.7% to 29.2%. This provides crucial short-term demand validation for the market. A trader in Kuala Lumpur commented, "Futures contracts are trading well above 4100 ringgit, supported by technical factors and driven by export data from January 1st to 10th." This view directly highlights the two pillars of the current market rebound.

The interconnected effects of external markets cannot be ignored. As of the afternoon of January 13th, Beijing time, the main soybean oil contract on the Dalian Commodity Exchange rose 0.43%, while the palm oil contract saw an even more significant increase, reaching 1.62%. Simultaneously, soybean oil prices on the Chicago Board of Trade (CBOT) also rose 0.62%. As a major competitor in the global vegetable oil market, the strong performance of related oilseed products naturally provided spillover support for palm oil prices. Furthermore, international crude oil prices rose slightly due to geopolitical supply concerns, which enhanced the attractiveness of palm oil as a biodiesel feedstock, adding further positive sentiment to the market.

However, market participants must be wary that the current price rebound still needs to be tested. The most critical source of pressure remains the persistently high inventory levels. According to the latest data, Malaysian palm oil inventories at the end of December last year had climbed to a near seven-year high, breaking through the important psychological threshold of 3 million tons. The main reason for this situation is that production that month reached an eight-year peak, completely overshadowing the destocking effect brought about by the only moderate recovery in exports. This heavy inventory report, like a "Sword of Damocles," will continue to hang over the market, limiting the upside potential and sustainability of prices.

From a news perspective, developments in Indonesia, another major palm oil producer, are attracting significant attention. A senior Indonesian government official recently stated that the launch of the country's much-anticipated mandatory blending program for B50 biodiesel (i.e., blending 50% palm oil-based fuel) will depend on the price difference between crude oil and crude palm oil. This statement suggests that while the long-term demand outlook for biodiesel is broad, the pace and intensity of its policy implementation are flexible, making it difficult to quickly absorb the massive supply pressure in the short term. Furthermore, the ringgit strengthened by 0.15% against the US dollar on the same day, slightly increasing procurement costs for dollar-denominated buyers and exerting a minor dampening effect on demand.

In his analysis, renowned technical analyst Wang Tao pointed out that after breaking through the key resistance level of 4,099 ringgit per ton, palm oil futures may further rise to 4,180 ringgit. This technical view provides a reference path for the market's short-term trend.

In summary, the palm oil market is currently caught in a tug-of-war between short-term positive factors and long-term structural pressures. On the one hand, strong export momentum at the beginning of the year, the strength of competing oils, and the biodiesel theme brought about by the crude oil market have collectively driven the price rebound. On the other hand, historically high inventory levels are an unavoidable reality for the market, fundamentally defining the current loose supply and demand situation. The future market trend will closely revolve around the sustainability of Malaysia's full-month export data for January, the extent of the seasonal decline in production in producing regions, and the progress of the actual implementation of Indonesia's Series B policies. Traders should be aware that a weakening of momentum on either side could cause the market to revert to pricing in inventory pressures. Although there is a possibility of technical upward movement, any upward trend is likely to face strong resistance from fundamentals until there is a substantial and trend-like decline in inventory.