Despite three major negative factors, why hasn't palm oil collapsed? The market is witnessing an energy shift behind pricing negotiations.
2026-02-23 18:42:17
On Monday (February 23), benchmark crude palm oil futures on the Bursa Malaysia Derivatives Exchange closed lower for the second consecutive trading day. The benchmark May contract fell 8 ringgit, or 0.2%, to settle at 4,084 ringgit per tonne. The core logic behind the market trading was that traders adjusted cross-market spreads in response to the weakness in Chicago soybean oil in the previous trading day, while the strengthening of the ringgit against the US dollar weakened the purchasing power of foreign currency holders.
Data from well-known organizations shows that the latest export forecasts released by shipping surveyors ITS and AmSpec Agri Malaysia indicate that Malaysia's palm oil product exports from February 1-20 decreased by 8.9% to 12.6% compared to the previous period. This weak data sets a bearish tone for the market, reflecting the cautious purchasing intentions of major importing countries amid high prices.
Regarding exchange rates, the Malaysian ringgit, the currency used for palm oil trading, appreciated by 0.31% that day, directly increasing procurement costs for overseas buyers. A Kuala Lumpur trader bluntly stated, "Given the strengthening ringgit, the upside potential for palm oil may be limited." This view aligns perfectly with the market's performance that day—exchange rate factors have become a significant variable suppressing prices.
Related Commodity Transmission <br />Chicago soybean oil futures rebounded 0.73% today after falling 1.31% in the previous trading day. However, due to the Dalian Commodity Exchange being closed for the Spring Festival holiday, lacking directional guidance from the Chinese market, the transmission effect of weakness in external markets was more pronounced in today's trading. Chicago soybean futures also retreated from the three-month high reached last week, mainly due to lingering market concerns about policy uncertainty following the US Supreme Court's rejection of former President Trump's broad tax measures.
Energy Market Linkage <br />International oil prices fell 1% on the day, mainly due to the easing of geopolitical concerns as the US and Iran approached a third round of nuclear negotiations; meanwhile, a new round of tariff increases exacerbated market concerns about global growth and fuel demand. The weakening of crude oil futures directly reduced the attractiveness of palm oil as a feedstock for biodiesel, creating a negative impact on energy attributes that resonated with fundamental factors.
Technical Levels and Market Outlook <br/>From a price structure analysis perspective, the benchmark contract is testing a key support area. Technical analysis from a well-known institution indicates that palm oil futures may test the support level of 4064 ringgit/ton. If this level is broken, it could further decline to 3999 ringgit. The market is currently in a sensitive phase with intertwined bullish and bearish factors: on the one hand, weak export data and a strengthening local currency are exerting real pressure; on the other hand, fluctuations in crude oil prices and the price ratios of substitutes such as soybean oil and sunflower oil will determine the depth of the correction.
Traders need to closely monitor three variables in the near term: first, the Malaysian Palm Oil Board's export data for the first 25 days of February, to be released on February 25th, to verify whether the demand slowdown trend continues; second, whether Chicago soybean oil can stabilize, as its price spread with palm oil will determine the flow of cross-commodity arbitrage funds; and third, the impulsive impact of geopolitical factors on crude oil prices. In the absence of new directional drivers, the market will likely remain weak and volatile, awaiting clearer guidance from the Malaysian Palm Oil Board's (MPOB) supply and demand report in early March.
Fundamentals and exchange rate dynamics
Data from well-known organizations shows that the latest export forecasts released by shipping surveyors ITS and AmSpec Agri Malaysia indicate that Malaysia's palm oil product exports from February 1-20 decreased by 8.9% to 12.6% compared to the previous period. This weak data sets a bearish tone for the market, reflecting the cautious purchasing intentions of major importing countries amid high prices.
Regarding exchange rates, the Malaysian ringgit, the currency used for palm oil trading, appreciated by 0.31% that day, directly increasing procurement costs for overseas buyers. A Kuala Lumpur trader bluntly stated, "Given the strengthening ringgit, the upside potential for palm oil may be limited." This view aligns perfectly with the market's performance that day—exchange rate factors have become a significant variable suppressing prices.
Related Commodity Transmission <br />Chicago soybean oil futures rebounded 0.73% today after falling 1.31% in the previous trading day. However, due to the Dalian Commodity Exchange being closed for the Spring Festival holiday, lacking directional guidance from the Chinese market, the transmission effect of weakness in external markets was more pronounced in today's trading. Chicago soybean futures also retreated from the three-month high reached last week, mainly due to lingering market concerns about policy uncertainty following the US Supreme Court's rejection of former President Trump's broad tax measures.
Energy Market Linkage <br />International oil prices fell 1% on the day, mainly due to the easing of geopolitical concerns as the US and Iran approached a third round of nuclear negotiations; meanwhile, a new round of tariff increases exacerbated market concerns about global growth and fuel demand. The weakening of crude oil futures directly reduced the attractiveness of palm oil as a feedstock for biodiesel, creating a negative impact on energy attributes that resonated with fundamental factors.
Technical Levels and Market Outlook <br/>From a price structure analysis perspective, the benchmark contract is testing a key support area. Technical analysis from a well-known institution indicates that palm oil futures may test the support level of 4064 ringgit/ton. If this level is broken, it could further decline to 3999 ringgit. The market is currently in a sensitive phase with intertwined bullish and bearish factors: on the one hand, weak export data and a strengthening local currency are exerting real pressure; on the other hand, fluctuations in crude oil prices and the price ratios of substitutes such as soybean oil and sunflower oil will determine the depth of the correction.
Traders need to closely monitor three variables in the near term: first, the Malaysian Palm Oil Board's export data for the first 25 days of February, to be released on February 25th, to verify whether the demand slowdown trend continues; second, whether Chicago soybean oil can stabilize, as its price spread with palm oil will determine the flow of cross-commodity arbitrage funds; and third, the impulsive impact of geopolitical factors on crude oil prices. In the absence of new directional drivers, the market will likely remain weak and volatile, awaiting clearer guidance from the Malaysian Palm Oil Board's (MPOB) supply and demand report in early March.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
