On Thursday (May 21), Malaysian palm oil futures continued their decline. The benchmark August contract, FCPOc3, closed down 126 ringgit, or 2.75%, at 4,457 ringgit (approximately US$1,125.51) per tonne, marking the second consecutive day of decline. Data from a well-known institution showed that from May 1 to 20, Malaysian palm oil product exports decreased by 13.9%-20.5% compared to the previous period, with weak export demand being the main drag. Meanwhile, crude oil prices continued their previous decline, further diminishing the attractiveness of palm oil as a feedstock for biodiesel.



On the Dalian Commodity Exchange, the most active soybean oil contract DBYcv1 fell 0.97%, and the palm oil contract DCPcv1 fell 2.02%; the Chicago Board of Trade soybean oil BOcv1 also fell 0.92%. As an important part of the global vegetable oil market, palm oil's price trend is closely linked to competing edible oils.

Weakening export data coupled with monetary factors have led to short-term supply pressures.

The core driver of this round of adjustments is the weakness in exports. Exports declined sharply month-on-month in the first half of May, reflecting low purchasing intentions among global buyers. Professional traders should note that this data contrasts sharply with the relatively strong export performance in April, indicating that the seasonal demand window has not yet effectively opened, or that downstream inventory digestion is slow.

The Malaysian ringgit appreciated slightly by 0.2% against the US dollar, further increasing the purchasing costs for foreign currency holders. Although the increase was limited, it did exert some downward pressure on marginal buying. Combined with the dynamics of the crude oil market, crude oil prices were pressured lower due to progress in US-Iran peace talks and a significant contraction in Eurozone economic activity, weakening the competitiveness of palm oil in biodiesel applications. This transmission path is clear: weak crude oil → narrowing biodiesel profit margins → downward revision of palm oil industrial demand expectations.

Fundamental supply and demand dynamics and cross-market linkage analysis

The market is currently in a phase of relatively ample supply and cautious demand. While Malaysia, a major global palm oil producer, has not experienced significant production abnormalities, its slowing exports have directly translated into inventory pressure. Traders have observed that the price spread between palm oil and alternative oils such as soybean oil and rapeseed oil is dynamically adjusting, with both Dalian and Chicago soybean oil prices declining in tandem, confirming the interconnectedness of the global vegetable oil sector.

From a longer-term perspective, palm oil still possesses some structural support, but in the short term, market focus has clearly shifted from the supply side to demand verification. In the coming week, traders should closely monitor subsequent export shipment data, the purchasing pace of major importing countries, and the turning point in crude oil prices. These factors will be key indicators for judging the strength and sustainability of the rebound.

The slight fluctuations in the ringgit exchange rate also serve as a reminder to participants that the marginal impact of currency factors on palm oil pricing cannot be ignored, especially against the backdrop of changes in the global liquidity environment.

Risk warnings and key points to watch in the market outlook

Current market conditions reflect a cautious sentiment regarding the pace of demand recovery. Professional traders need to balance new fundamental developments with technical signals to avoid being swayed by a single factor in their decisions. Progress in oil peace negotiations, subsequent performance of Eurozone economic data, and inventory levels in major consuming countries will continue to influence the central price of palm oil.

Overall, this adjustment reflects the market's pricing of short-term realities, but it does not change palm oil's core position in global edible and industrial applications. Traders need to remain flexible and update their supply and demand forecasts based on real-time data.

Frequently Asked Questions

What are the main reasons for the recent decline in Malaysian palm oil futures?
Exports from May 1 to 20 decreased by 13.9%-20.5% month-on-month, with the main drag being the weakening of crude oil prices leading to a decrease in expected demand for biodiesel.

How have the contracts in Dalian and Chicago performed?
Dalian soybean oil fell 0.97%, palm oil fell 2.02%, and Chicago soybean oil fell 0.92%, indicating that the global vegetable oil sector was under pressure overall.

What impact do changes in the Malaysian Ringgit exchange rate have on palm oil prices?
The ringgit appreciated by 0.2% against the US dollar, slightly increasing the purchasing costs for foreign currency buyers and exerting a minor restraint on marginal demand.

What data should traders focus on in the short term?
Subsequent export shipping schedule data, procurement situation of major importing countries, crude oil trends, and downstream inventory digestion progress.

Will this price drop change the long-term supply and demand pattern of palm oil?
In the short term, this reflects the reality of weak demand, but it has not fundamentally changed its core position in the global vegetable oil market. In the long term, it is still necessary to observe changes in production and structural demand.