Malaysian palm oil futures closed lower for the fourth consecutive trading day on Wednesday (February 25). Although they recovered from intraday lows with the support of bargain hunting, the weak tone of external markets continued to weigh on prices. At the close, the benchmark May contract was unchanged at 4052 ringgit per tonne, down slightly by 1 ringgit during the day, exhibiting a narrow trading range overall.



The market is currently in a tug-of-war between bulls and bears. A Kuala Lumpur trader pointed out that some bargain hunting emerged after the continuous decline, which is the main reason why the market was able to hold the key psychological level today. However, the rebound momentum is clearly insufficient, as both Chicago soybean oil and Dalian Commodity Exchange (DCE) palm oil futures are releasing bearish signals. Looking at the performance of related commodities, the 0.96% rise in the DCE soybean oil futures contract failed to boost market sentiment for palm oil; instead, the DCE palm oil futures contract closed slightly lower by 0.16%, and Chicago soybean oil futures also fell by 0.46%. As three pillars of the global vegetable oil market, the substitution relationship between palm oil and soybean oil in the biodiesel and food sectors determines the high correlation of their price trends.

Export data became the core negative factor suppressing the market. Data released by two major inspection agencies for the first 25 days of February showed that Malaysian palm oil product exports declined by between 12.1% and 16.1% month-on-month. The 16.1% decline reported by independent inspection company AmSpec Agri exceeded market expectations, raising concerns among traders about a slowdown in purchasing by major importing countries. It is worth noting that this export decline was larger than the data from the first 20 days, indicating that shipments in late February had not yet shown significant improvement.

The exchange rate also presents a challenge. The ringgit appreciated slightly by 0.08% against the US dollar. Although the magnitude was small, it further diminished the attractiveness of Malaysian palm oil to buyers holding foreign currencies such as the US dollar.

The signals from the external macroeconomic environment are relatively complex. Chicago soybean futures climbed to a three-month high, mainly boosted by expectations of Chinese demand—recent statements from Beijing regarding trade policy eased some market concerns about tariffs. A slight increase in crude oil prices also provided potential support for palm oil, as a strong energy market would enhance its attractiveness as a biodiesel feedstock. However, this transmission mechanism is not yet fully reflected in the market, as traders are still assessing the potential impact of the geopolitical conflict between the US and Iran on crude oil supply.

From a capital game perspective, the market has declined for four consecutive days, and there is indeed a need for a technical rebound. However, there is currently a lack of substantial positive factors that can reverse the situation, and weak exports remain a Damocles' sword hanging over the bulls. If shipping data does not show significant improvement in the next two weeks, market expectations for pre-Ramadan stockpiling may cool further.

Looking ahead, two key aspects need to be monitored: first, the recovery of production in Malaysia and Indonesia, as the market is becoming increasingly sensitive to weather conditions in these producing regions; and second, changes in inventory levels in major importing countries, particularly India and China, which could determine the timing of the next round of concentrated purchasing. Until export data shows a substantial improvement, palm oil is unlikely to break away from the strong performance of soybean oil, and in the short term, it may continue to maintain a weak and volatile pattern.