Palm oil prices are under pressure as inventory levels approach a turning point, awaiting a directional decision ahead of a key meeting.
2026-02-06 19:02:54
On Friday (February 6), crude palm oil futures on the Malaysian Derivatives Exchange (BMD) closed lower. As of 18:30 Beijing time, the benchmark April contract settled at 4153 ringgit per tonne, down 53 ringgit or 1.26% on the day, and a cumulative weekly decline of 1.8%, marking the first weekly correction after five consecutive weeks of gains. This decline was mainly dragged down by weaker prices of competing vegetable oils in the Chicago and Dalian markets, coupled with a cautious market ahead of key industry meetings next week.
This week, the palm oil market was significantly influenced by the external market environment. As a crucial component of the global vegetable oil trade, palm oil prices are highly correlated with other major edible oils such as soybean oil and rapeseed oil. This week, soybean oil prices on the Chicago Board of Trade (CBOT) were weak, while soybean oil and palm oil futures contracts on the Dalian Commodity Exchange also declined. A trader based in Kuala Lumpur noted, "The decline in Malaysian BMD crude palm oil futures was mainly due to adjustments in competing oilseed spreads. Market participants adopted a cautious stance ahead of the upcoming Malaysian palm oil conference in Kuala Lumpur." This clearly demonstrates that, in the absence of a strong independent bullish driver, palm oil prices are easily affected by the broader sentiment across the vegetable oil sector.
Despite short-term price pressure, the latest survey data shows a quiet but positive shift in palm oil fundamentals. According to a survey of industry analysts, Malaysian palm oil inventories in January are likely to end a ten-month streak of continuous growth. This shift in expectations stems primarily from two factors: the arrival of the seasonal production decline and a significant jump in exports for the month. The cyclical decline in production aligns with past patterns, while strong exports provide crucial support. If the survey forecast materializes, the inventory inflection point will fundamentally alleviate the supply pressure that has been suppressing the market, providing medium- to long-term price support. However, this potential bullish factor currently appears to be temporarily overshadowed by the weakness in competing oils this week and a wait-and-see attitude in the market.
Analysts have offered multiple perspectives on the current market. A renowned technical analyst points out that the benchmark palm oil contract may retest the support level of 4169 ringgit per tonne. A clear break below this level could further open a channel towards the 4116-4148 ringgit range. This technical view highlights the downside risk area facing prices in the short term.
Market focus has shifted to the Malaysian palm oil conference scheduled for next week in Kuala Lumpur. As the industry's annual event, the production outlook, demand forecasts, and biodiesel policy developments released during the conference typically have a significant impact on market expectations. The current cautious stance reflects traders' anticipation of clearer fundamental and policy guidance from this conference to determine the next price direction.
In summary, the palm oil market is currently at a juncture where bullish and bearish factors are intertwined. The bearish forces mainly stem from short-term drag from related external markets and position adjustments ahead of important events; while the bullish potential rests on the upcoming inventory inflection point and potentially positive signals from industry conferences.
The future price logic may evolve along the following path: In the short term, the trends in the competitive edible oil market and the effectiveness of technical support levels will continue to influence market sentiment and price volatility. The core driver of the medium-term trend will depend on whether the official inventory data for January confirms a downward trend, and whether the resulting shift in the supply-demand balance is consistently corroborated by subsequent data. Furthermore, any signals from industry conferences regarding import policies of major consuming countries, the resilience of global demand, particularly demand growth in the biodiesel sector, and the recovery of production in major producing countries will be crucial for market repricing.
Therefore, professional traders should not only pay attention to daily price fluctuations but also closely monitor the upcoming Malaysian Palm Oil Board (MPOB) monthly report and carefully analyze the outcomes of next week's industry conference. The market is awaiting new and definite drivers to break the current stalemate, and a potential shift in the inventory cycle may become a crucial cornerstone for future market developments.
Competition in the edible oil market is creating pressure, and price linkages are becoming apparent.
This week, the palm oil market was significantly influenced by the external market environment. As a crucial component of the global vegetable oil trade, palm oil prices are highly correlated with other major edible oils such as soybean oil and rapeseed oil. This week, soybean oil prices on the Chicago Board of Trade (CBOT) were weak, while soybean oil and palm oil futures contracts on the Dalian Commodity Exchange also declined. A trader based in Kuala Lumpur noted, "The decline in Malaysian BMD crude palm oil futures was mainly due to adjustments in competing oilseed spreads. Market participants adopted a cautious stance ahead of the upcoming Malaysian palm oil conference in Kuala Lumpur." This clearly demonstrates that, in the absence of a strong independent bullish driver, palm oil prices are easily affected by the broader sentiment across the vegetable oil sector.
Fundamentals are showing signs of marginal improvement, and the upward trend in inventory levels may be about to turn around.
Despite short-term price pressure, the latest survey data shows a quiet but positive shift in palm oil fundamentals. According to a survey of industry analysts, Malaysian palm oil inventories in January are likely to end a ten-month streak of continuous growth. This shift in expectations stems primarily from two factors: the arrival of the seasonal production decline and a significant jump in exports for the month. The cyclical decline in production aligns with past patterns, while strong exports provide crucial support. If the survey forecast materializes, the inventory inflection point will fundamentally alleviate the supply pressure that has been suppressing the market, providing medium- to long-term price support. However, this potential bullish factor currently appears to be temporarily overshadowed by the weakness in competing oils this week and a wait-and-see attitude in the market.
Institutional perspectives focus on technical support and conference guidelines
Analysts have offered multiple perspectives on the current market. A renowned technical analyst points out that the benchmark palm oil contract may retest the support level of 4169 ringgit per tonne. A clear break below this level could further open a channel towards the 4116-4148 ringgit range. This technical view highlights the downside risk area facing prices in the short term.
Market focus has shifted to the Malaysian palm oil conference scheduled for next week in Kuala Lumpur. As the industry's annual event, the production outlook, demand forecasts, and biodiesel policy developments released during the conference typically have a significant impact on market expectations. The current cautious stance reflects traders' anticipation of clearer fundamental and policy guidance from this conference to determine the next price direction.
Future Market Logic Deduction and Key Focus
In summary, the palm oil market is currently at a juncture where bullish and bearish factors are intertwined. The bearish forces mainly stem from short-term drag from related external markets and position adjustments ahead of important events; while the bullish potential rests on the upcoming inventory inflection point and potentially positive signals from industry conferences.
The future price logic may evolve along the following path: In the short term, the trends in the competitive edible oil market and the effectiveness of technical support levels will continue to influence market sentiment and price volatility. The core driver of the medium-term trend will depend on whether the official inventory data for January confirms a downward trend, and whether the resulting shift in the supply-demand balance is consistently corroborated by subsequent data. Furthermore, any signals from industry conferences regarding import policies of major consuming countries, the resilience of global demand, particularly demand growth in the biodiesel sector, and the recovery of production in major producing countries will be crucial for market repricing.
Therefore, professional traders should not only pay attention to daily price fluctuations but also closely monitor the upcoming Malaysian Palm Oil Board (MPOB) monthly report and carefully analyze the outcomes of next week's industry conference. The market is awaiting new and definite drivers to break the current stalemate, and a potential shift in the inventory cycle may become a crucial cornerstone for future market developments.
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