Malaysian palm oil futures showed strong performance on Thursday (March 19), with the benchmark contract closing up more than 1%, marking its third consecutive week of gains. The benchmark palm oil contract FCPOc3 for June 2025 delivery on the Bursa Malaysia Derivatives Exchange finally closed at 4,612 ringgit per tonne, a daily increase of 84 ringgit, or 1.86%.



This week's market trading exhibited a unique rhythm due to the holiday factor. With a public holiday on Friday and trading resuming on March 24th, some traders opted to lock in profits before the long weekend, which limited further upward momentum. A Kuala Lumpur trader stated that while the strong performance of Dalian edible oil futures provided major support, profit-taking ahead of the holiday, coupled with some market participants choosing to remain on the sidelines due to the long weekend, prevented the upside potential from fully opening up.

External edible oil and energy markets are linked: Dalian soybean oil holds firm, while soaring crude oil prices become a key variable.

Looking at the interconnectedness of the global edible oil sector, today's strength in palm oil is inextricably linked to the performance of related commodities. The Dalian Commodity Exchange's most active soybean oil contract, DBYcv1, rose slightly by 0.12%, while the Dalian palm oil contract, DCPcv1, fell slightly by 0.43%. Meanwhile, the Chicago Board of Trade (CBOT) soybean oil price, BOcv1, also recorded a 0.4% increase. As a crucial component of the global vegetable oil market, palm oil prices closely track changes in the prices of alternative oils to maintain its competitiveness in the global market share.

More noteworthy is the dramatic volatility in the energy market. Geopolitical tensions escalated sharply on Thursday as Iran retaliated against Israel's attack on its South Pars gas field by launching attacks on energy facilities in the Middle East. This significant escalation immediately triggered concerns about crude oil supplies, sending Brent crude futures prices soaring to over $115 a barrel, a more than one-week high.

The surge in crude oil prices has directly enhanced the economic appeal of palm oil as a feedstock for biodiesel . Higher crude oil prices increase the profitability of biodiesel production and use, thereby stimulating industrial demand for palm oil for energy conversion. This indicates that the current market focus is rapidly shifting towards the spillover effects of the energy market.

Institutional Perspective and Fundamentals: Short-term price anchoring, but underlying cost concerns emerge.

Regarding the short-term market outlook, the Malaysian Palm Oil Council (MPOC), a well-known industry body, has provided clear guidance. The council believes that given the continued rise in energy prices and the high degree of uncertainty in the Middle East, crude palm oil prices are likely to remain above the key level of 4,450 ringgit per tonne in the near term. This assessment provides significant psychological support for the market.

However, beyond rising prices, cost pressures are mounting. Supply chain disruptions caused by the conflict have begun to spread upstream. It is reported that Malaysian fertilizer manufacturers have suspended accepting new orders. Exacerbated by geopolitical tensions, raw material shortages have led to soaring fertilizer raw material prices. This situation poses a potential long-term threat to palm oil producers, as fertilizer is one of the largest variable costs for plantations. In the future, rising fertilizer costs will inevitably be passed on to fresh fruit bunch production and the final cost of refined oil.

Exchange rate factors: A weaker ringgit provides additional price flexibility.

At the macro level, the Malaysian ringgit (MYR), the currency used to price palm oil, weakened today, falling 0.59% against the US dollar. For overseas buyers holding foreign currencies such as the US dollar, the depreciation of the ringgit means that palm oil priced in local currency becomes cheaper. This exchange rate change provides implicit support for the competitiveness of Malaysian palm oil exports on the demand side, allowing international buyers to obtain relatively favorable prices even when ringgit prices rise, thus offsetting to some extent the dampening effect of high prices on demand.

Overall, the palm oil market is currently in a complex environment influenced by multiple factors: the stability of the broader edible oil market, the surge in energy prices, geopolitical uncertainties, cost concerns, and exchange rate fluctuations have all contributed to the current market situation. In the coming week, after the market reopens, traders need to closely monitor further developments in the Middle East, the sustainability of crude oil prices, and the performance of Malaysian palm oil export data, as these will be key indicators for determining whether the upward trend can continue.

Market Core Questions and Answers

Question 1: What were the main drivers behind the rise in palm oil prices this week?
Answer: Palm oil prices rose for the third consecutive week this week, driven by two main factors: first, the boost from external markets, particularly the strong performance of soybean oil in Dalian; and second, escalating geopolitical conflicts leading to a surge in crude oil prices, which directly enhanced the attractiveness of palm oil as a feedstock for biodiesel. Market focus is rapidly shifting towards the spillover effects of the energy market.

Question 2: How do geopolitical conflicts in the Middle East specifically affect the palm oil market?
Answer: Mainly through two channels. First, by pushing up crude oil prices, the economics of using palm oil to produce biodiesel are improved, thereby stimulating industrial demand. Second, by disrupting the fertilizer supply chain; Malaysian fertilizer manufacturers have suspended new orders due to raw material shortages, which will drive up future palm oil production costs and create long-term cost support.

Question 3: Why do profits take place in the market when prices are rising?
Answer: The main reason is that Malaysia will be on holiday this Friday, and the market will be closed until March 24th. Before the long weekend, some traders tend to lock in profits to mitigate potential uncertainties during the holiday period. This is a typical pre-holiday position adjustment, which limits further upside potential for prices.

Question 4: What are the views of well-known institutions on the recent palm oil price?
Answer: The Malaysian Palm Oil Council (MPOC), a well-known institution, stated that crude palm oil prices are expected to remain firm in the short term, likely holding above 4,450 ringgit per tonne, due to continued rising energy prices and uncertainty in the Middle East. This provides the market with a clear guidance on the short-term price range.

Question 5: What impact do fluctuations in the Malaysian Ringgit exchange rate have on palm oil prices?
Answer: The Malaysian ringgit depreciated by 0.59% against the US dollar, making it relatively cheaper for international buyers to purchase palm oil in US dollar terms. This provides resilience to the export competitiveness of Malaysian palm oil, offsetting to some extent the potential demand suppression caused by higher prices, thus giving palm oil a greater price advantage in the international market.