Palm oil breaks 15-month high: B50 expectations and Middle East turmoil ignite fifth consecutive week of gains.
2026-04-03 19:35:30
On Friday (April 3), the benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange closed strongly higher. The June contract rose 47 ringgit, or 0.98%, to settle at 4,838 ringgit per tonne (approximately US$1,201.09). This closing price marked the highest level since December 13, 2024. On the weekly chart, the contract rose 4.47% this week, successfully recording its fifth consecutive week of gains.
The market demonstrated remarkable resilience throughout this week's trading, with bullish forces persisting throughout.
The anticipated sharp drop in inventories is the most direct driving force at present. A survey by a well-known institution indicates that Malaysian palm oil inventories at the end of March may see their largest monthly decline in nearly three years, expected to fall to their lowest level since July last year. Strong export growth, even in the face of a moderate recovery in production, has easily outweighed the pressure from the supply side. The March supply and demand data, scheduled for release by the Malaysian Palm Oil Board on April 10th, will be a crucial moment to verify this logic.
Indonesia's B50 biodiesel program has injected long-term potential into the market. If implemented, this policy would significantly expand domestic consumption, directly reducing its export capacity and thus tightening global supply.
Geopolitical tensions in the Middle East have been transmitted to the palm oil market through sharp fluctuations in crude oil prices. From the night of April 2nd to the early morning of April 3rd (Beijing time), the international crude oil market experienced an explosive surge—US crude oil soared by over 11% in a single day, and Brent crude oil also rose by nearly 8%. As a feedstock for biodiesel, palm oil's price movements are highly correlated with the energy market. High crude oil prices have increased the attractiveness of palm oil as an alternative energy source.
Sandeep Singh, director of consulting and trading firm The Farm Trade, pointed out that after a long period of observation, some buyers have begun to re-enter the market. However, he also warned that once prices break through 4,900 ringgit per tonne, the market will generally consider it too expensive, and purchasing intentions may cool down rapidly. This psychological barrier is forming a hidden resistance to short-term upward movement.
On April 3, Beijing time, the most active soybean oil contract on the Dalian Commodity Exchange rose 0.53%, and the palm oil contract rose 0.59%. The Chicago Board of Trade was closed for a public holiday and was unable to provide price guidance for the day.
The ringgit strengthened by 0.2% against the US dollar on the day, which means that for buyers holding foreign currency, the cost of purchasing in local currency has increased, thus exerting some marginal pressure on demand.
As the world's largest importer of palm oil, India saw its imports plummet by nearly 19% in March, hitting a three-month low. Five distributors stated that palm oil prices, following the energy market's upward trend, forced refineries to halt purchases and await price corrections. This is a worrying sign—high prices are substantially damaging demand. If Indian buyers continue their wait-and-see attitude, it could become a significant trigger for a future price correction.
The Farm Trade Director Sandeep Singh believes that declining Malaysian inventories, the potential implementation of Indonesia's B50 program, high crude oil volatility, and US policy uncertainty are collectively supporting the current high prices. Prices above 4900 ringgit are considered too expensive and unaffordable for buyers.
The direct cause of the nearly 19% decline in imports by the Indian distributor group (five people) in March was excessively high prices, prompting refineries to proactively postpone purchases and await market correction.
In the coming week, the market will be closely watching the official MPOB inventory data on April 10th. Any deviation from the survey expectations (a significant decline in inventories) could trigger sharp fluctuations. Meanwhile, the 4900 ringgit level is a key watershed for observing whether the bulls can continue their advance. If the crude oil market continues its strength after the holiday, it will continue to provide external support for palm oil; conversely, if geopolitical premiums ease, the high base of palm oil will be eroded.
The current rise in palm oil prices is driven by expectations of tightening supply and anticipated policy changes. However, the substantial contraction in Indian imports serves as a reminder to all market participants that prices are nearing a point of demand collapse. A more intense battle between bulls and bears is expected in the 4800-4900 ringgit range.
Q: Why is the expectation of declining Malaysian inventories having such a strong upward effect on prices?
A: Inventory is the most direct reflection of supply and demand balance. If March inventories show the largest decline in nearly three years, as the survey indicates, it means the market is tighter than previously anticipated. Given the uncertainty surrounding Indonesia's B50 policy and the Middle East situation pushing up crude oil prices, low inventories will be the strongest support for bulls. If the MPOB data released on April 10th confirms this trend, it could further stimulate buying.
Q: If Indonesia's B50 plan is implemented, how much will it change the supply and demand landscape?
A: B50 means increasing the palm oil blending ratio in biodiesel from the current level to 50%. This will significantly increase domestic consumption in Indonesia, directly reducing the amount available for export. As Indonesia is the world's largest palm oil exporter, this reduction will lead to competition for the remaining supply among global buyers, thus driving up international prices. While the plan is still under policy discussion, its very existence is already influencing market pricing.
Q: India's imports have shrunk by nearly 19%, so why are prices still rising?
A: The core drivers of current prices are not on the demand side, but on the supply side and external transmission (crude oil, geopolitics). The temporary withdrawal of Indian buyers is indeed a warning sign, but the market is more focused on declining Malaysian inventories and Indonesian policy expectations. This situation is unsustainable—if prices continue to remain high while India remains absent, the foundation for the upward trend will gradually weaken. Traders need to closely monitor when India re-enters the market.
Q: What is the specific transmission mechanism of crude oil prices to palm oil?
A: There are two paths. First, the biodiesel substitution logic—the more expensive crude oil, the more economical biodiesel made from palm oil becomes, thus stimulating additional demand. Second, market sentiment linkage—a surge in crude oil prices is usually accompanied by escalating geopolitical risks or rising inflation expectations, causing funds to flow into commodities including palm oil. The simultaneous rise in palm oil prices after a more than 11% surge in US crude oil prices this week is a typical example.
Q: Why is 4,900 ringgit considered by the market as the critical point of being "too expensive"?
A: This is an empirical threshold derived by analyst Sandeep Singh based on observations of spot buyer behavior. Given the sharp drop in Indian imports in March, when prices broke through this level, refinery profit margins were severely compressed, leading to a precipitous decline in purchasing intentions. This price level can also be interpreted as the starting point for demand disruption . Whether prices can stabilize above 4900 depends on whether the tightening of supply can outweigh the resistance from demand.
The market demonstrated remarkable resilience throughout this week's trading, with bullish forces persisting throughout.
Triple engine drives up prices
The anticipated sharp drop in inventories is the most direct driving force at present. A survey by a well-known institution indicates that Malaysian palm oil inventories at the end of March may see their largest monthly decline in nearly three years, expected to fall to their lowest level since July last year. Strong export growth, even in the face of a moderate recovery in production, has easily outweighed the pressure from the supply side. The March supply and demand data, scheduled for release by the Malaysian Palm Oil Board on April 10th, will be a crucial moment to verify this logic.
Indonesia's B50 biodiesel program has injected long-term potential into the market. If implemented, this policy would significantly expand domestic consumption, directly reducing its export capacity and thus tightening global supply.
Geopolitical tensions in the Middle East have been transmitted to the palm oil market through sharp fluctuations in crude oil prices. From the night of April 2nd to the early morning of April 3rd (Beijing time), the international crude oil market experienced an explosive surge—US crude oil soared by over 11% in a single day, and Brent crude oil also rose by nearly 8%. As a feedstock for biodiesel, palm oil's price movements are highly correlated with the energy market. High crude oil prices have increased the attractiveness of palm oil as an alternative energy source.
Spot buying has quietly returned, but a price ceiling is emerging.
Sandeep Singh, director of consulting and trading firm The Farm Trade, pointed out that after a long period of observation, some buyers have begun to re-enter the market. However, he also warned that once prices break through 4,900 ringgit per tonne, the market will generally consider it too expensive, and purchasing intentions may cool down rapidly. This psychological barrier is forming a hidden resistance to short-term upward movement.
External markets: Dalian rose, CBOT closed, and the Malaysian Ringgit strengthened.
On April 3, Beijing time, the most active soybean oil contract on the Dalian Commodity Exchange rose 0.53%, and the palm oil contract rose 0.59%. The Chicago Board of Trade was closed for a public holiday and was unable to provide price guidance for the day.
The ringgit strengthened by 0.2% against the US dollar on the day, which means that for buyers holding foreign currency, the cost of purchasing in local currency has increased, thus exerting some marginal pressure on demand.
India's imports unexpectedly shrink: High prices are backfiring on demand.
As the world's largest importer of palm oil, India saw its imports plummet by nearly 19% in March, hitting a three-month low. Five distributors stated that palm oil prices, following the energy market's upward trend, forced refineries to halt purchases and await price corrections. This is a worrying sign—high prices are substantially damaging demand. If Indian buyers continue their wait-and-see attitude, it could become a significant trigger for a future price correction.
Summary of Analysts' Key Views
The Farm Trade Director Sandeep Singh believes that declining Malaysian inventories, the potential implementation of Indonesia's B50 program, high crude oil volatility, and US policy uncertainty are collectively supporting the current high prices. Prices above 4900 ringgit are considered too expensive and unaffordable for buyers.
The direct cause of the nearly 19% decline in imports by the Indian distributor group (five people) in March was excessively high prices, prompting refineries to proactively postpone purchases and await market correction.
Key Focus Areas for Future Market Development
In the coming week, the market will be closely watching the official MPOB inventory data on April 10th. Any deviation from the survey expectations (a significant decline in inventories) could trigger sharp fluctuations. Meanwhile, the 4900 ringgit level is a key watershed for observing whether the bulls can continue their advance. If the crude oil market continues its strength after the holiday, it will continue to provide external support for palm oil; conversely, if geopolitical premiums ease, the high base of palm oil will be eroded.
The current rise in palm oil prices is driven by expectations of tightening supply and anticipated policy changes. However, the substantial contraction in Indian imports serves as a reminder to all market participants that prices are nearing a point of demand collapse. A more intense battle between bulls and bears is expected in the 4800-4900 ringgit range.
Frequently Asked Questions
Q: Why is the expectation of declining Malaysian inventories having such a strong upward effect on prices?
A: Inventory is the most direct reflection of supply and demand balance. If March inventories show the largest decline in nearly three years, as the survey indicates, it means the market is tighter than previously anticipated. Given the uncertainty surrounding Indonesia's B50 policy and the Middle East situation pushing up crude oil prices, low inventories will be the strongest support for bulls. If the MPOB data released on April 10th confirms this trend, it could further stimulate buying.
Q: If Indonesia's B50 plan is implemented, how much will it change the supply and demand landscape?
A: B50 means increasing the palm oil blending ratio in biodiesel from the current level to 50%. This will significantly increase domestic consumption in Indonesia, directly reducing the amount available for export. As Indonesia is the world's largest palm oil exporter, this reduction will lead to competition for the remaining supply among global buyers, thus driving up international prices. While the plan is still under policy discussion, its very existence is already influencing market pricing.
Q: India's imports have shrunk by nearly 19%, so why are prices still rising?
A: The core drivers of current prices are not on the demand side, but on the supply side and external transmission (crude oil, geopolitics). The temporary withdrawal of Indian buyers is indeed a warning sign, but the market is more focused on declining Malaysian inventories and Indonesian policy expectations. This situation is unsustainable—if prices continue to remain high while India remains absent, the foundation for the upward trend will gradually weaken. Traders need to closely monitor when India re-enters the market.
Q: What is the specific transmission mechanism of crude oil prices to palm oil?
A: There are two paths. First, the biodiesel substitution logic—the more expensive crude oil, the more economical biodiesel made from palm oil becomes, thus stimulating additional demand. Second, market sentiment linkage—a surge in crude oil prices is usually accompanied by escalating geopolitical risks or rising inflation expectations, causing funds to flow into commodities including palm oil. The simultaneous rise in palm oil prices after a more than 11% surge in US crude oil prices this week is a typical example.
Q: Why is 4,900 ringgit considered by the market as the critical point of being "too expensive"?
A: This is an empirical threshold derived by analyst Sandeep Singh based on observations of spot buyer behavior. Given the sharp drop in Indian imports in March, when prices broke through this level, refinery profit margins were severely compressed, leading to a precipitous decline in purchasing intentions. This price level can also be interpreted as the starting point for demand disruption . Whether prices can stabilize above 4900 depends on whether the tightening of supply can outweigh the resistance from demand.
- 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.
