On Thursday (February 26), the benchmark palm oil futures contract on the Malaysian Derivatives Exchange closed lower, ending its previous volatile trading pattern. The benchmark May contract settled at 4,005 ringgit per tonne, down 48 ringgit for the day, a decrease of 1.18%. Today's market was mainly dragged down by the weak Dalian vegetable oil market, while the strengthening ringgit and slowing export demand created a double pressure.



Looking at the market performance, the palm oil market lacked upward momentum today. The Dalian Commodity Exchange's soybean oil futures contract fell 0.1%, while the palm oil contract dropped 1.51%; soybean oil prices on the Chicago Board of Trade also weakened, falling 0.74%. A trader in Kuala Lumpur pointed out that palm oil is currently completely following the weakness in the Dalian market, while the strengthening of the ringgit against the US dollar further pressured prices. Data shows that the ringgit rose 0.13% today, hovering near its highest level since April 2018, putting real purchasing cost pressure on buyers holding foreign currency.

Export data confirms the weakness in demand. Data released by independent testing company AmSpec Agri Malaysia shows that Malaysian palm oil exports from February 1st to 25th fell by 16.1% compared to the same period last month; another agency, Intertek Testing Services, reported a decline of 12.1%. Although the statistical methods differ slightly, both sets of data point to the same fact: the pace of shipments slowed significantly in the first 25 days of the month. Market participants believe that pre-Ramadan stockpiling demand was not as strong as expected, which may be related to inventory levels and adjustments in purchasing strategies by major importing countries.

From a competitive perspective, palm oil is facing temporary pressure in the battle for market share in the global vegetable oil market. The across-the-board weakness in edible oil varieties in both the Dalian and Chicago markets reflects a generally bearish sentiment in the vegetable oil sector. In particular, the more than 1.5% drop in Dalian palm oil prices has directly impacted the Malaysian market. It is worth noting that although palm oil is still in a production reduction cycle, the core logic of market trading has shifted from supply to demand and exchange rates.

From a price structure perspective, palm oil may break below the support level of 4036 ringgit, and then test the 3999-4012 ringgit range. This technical assessment echoes the current fundamentals—the strong ringgit is unlikely to reverse in the short term, and if the external vegetable oil market continues its weakness, pressure on the Malaysian market will persist.

Looking ahead, market focus will be on two aspects: first, the actual purchasing actions of major importing countries, particularly whether Ramadan stockpiling will show any improvement in the final week; and second, the transmission effect of crude oil price fluctuations on biodiesel demand. Judging from the current situation, for palm oil to reverse its downward trend, a substantial improvement in export data or a stabilization in the external vegetable oil market is needed. Until then, the market is likely to maintain a weak consolidation pattern, with the 4000 ringgit level becoming a key battleground between bulls and bears.