Behind the continuous decline in palm oil prices: Demand signals are collectively weakening, is it a normal correction or an approaching trend turning point?
2026-05-25 18:53:13
Malaysian palm oil futures closed lower on Monday (May 25), tracking weakness in competing edible oils in the Dalian market, while falling crude oil prices and weak export data further weighed on market sentiment. The benchmark August delivery FCPO contract fell 14 ringgit, or 0.31%, to settle at 4,472 ringgit per tonne (approximately US$1,131.87).
Data from independent testing agencies shows a significant decline in Malaysian palm oil exports from May 1-25 compared to April 1-25. AmSpec Agri Malaysia estimates the decline at 18.0%, while Intertek Testing Services estimates it at 14.5%. This short-term export weakness directly reflects current demand pressure and was one of the main fundamental factors putting downward pressure on futures prices that day.
Professional traders should note that export data typically leads price movements. The slowdown in exports in May, compared to April, indicates a weakening of global buyers' willingness to purchase within the current price range. Combined with seasonal factors, changes in export data in the coming weeks will be a key indicator of demand resilience.
The most actively traded soybean oil contract in the Dalian market fell 0.87%, while the palm oil contract fell 0.18%. The Chicago market was closed for a holiday. As one of the world's major vegetable oils, palm oil prices are highly correlated with competing commodities such as soybean oil, as they vie for global edible oil market share. The weakness in the Dalian market that day directly impacted Malaysian palm oil futures, creating a clear cross-market linkage effect.
Crude oil prices fell more than 4% on the day, hitting a two-week low. This further reduced the attractiveness of palm oil as a feedstock for biodiesel. The substitution relationship between crude oil and palm oil is evident in their energy properties; lower crude oil prices typically weaken industrial demand for palm oil.
Data released by the Indonesian Palm Oil Association (GAPKI) shows that Indonesia's palm oil exports in March totaled 2.17 million tons, down from 2.88 million tons in the same period last year. While the overall supply remains relatively abundant, the slowdown in exports echoes the data from Malaysia.
Furthermore, the price of fresh fruit bunches (FFB) in Indonesia has seen a significant decline at the farmer level, following the government's announcement of a plan to export commodities through a unified channel of central state-owned enterprises, which put pressure on the local spot market. This policy adjustment may affect the export pace of Indonesian palm oil in the medium term, and traders need to continue to monitor the impact of subsequent implementation details by the Indonesian government on actual export volumes.
The Malaysian ringgit, the currency used to price palm oil, appreciated by 0.38% against the US dollar on the day. The stronger exchange rate increased procurement costs for buyers holding foreign currency, further suppressing demand. This factor, along with weak export data, constituted a short-term bearish combination.
In summary , the current market focus is shifting from the supply side to demand-side verification. Declining export data, weakening competing edible oils, and falling crude oil prices have combined to suppress palm oil prices in the short term. However, from a longer-term perspective, the global vegetable oil supply and demand pattern still has seasonal variables. Traders need to pay attention to subsequent monthly export updates from Malaysia and Indonesia, as well as the dynamics of competing edible oils in the Dalian and Chicago markets. These data will be important indicators for judging whether a trend shift in the price center is occurring.
In the current environment, professional traders should closely monitor the impact of MYR exchange rate fluctuations on export competitiveness, as well as the transmission of geopolitical news in the oil market to energy attributes. In the coming week, the daily cumulative data updated by export inspection agencies will be worth close monitoring, as marginal changes in this data may become a leading signal of a shift in market sentiment.
What were the main reasons for the decline in Malaysian palm oil futures on May 25?
The decline was mainly dragged down by falling prices of competing edible oils in Dalian, a sharp drop in crude oil prices, and a significant decline in Malaysian export data for May. The FCPO August contract fell 0.31% to 4472 ringgit.
How did Malaysia's export data perform in May?
Exports from May 1-25 declined compared to the same period in April, with AmSpec estimating a drop of 18.0% and Intertek estimating a drop of 14.5%, indicating short-term demand pressure.
What are the latest changes in Indonesian palm oil exports and domestic prices?
March exports totaled 2.17 million tons, a year-on-year decrease; at the farmer level, the price of fresh fruit bunches fell due to the government's policy of unifying export channels.
How does the decline in crude oil prices affect palm oil?
Lower crude oil prices have reduced the attractiveness of palm oil as a feedstock for biodiesel, weakening its industrial demand support.
What does a stronger ringgit mean for the market?
The 0.38% appreciation of the ringgit increased costs for foreign currency buyers, dampening their purchasing intentions and creating a short-term negative impact in conjunction with weak exports.
Spot exports declined significantly
Data from independent testing agencies shows a significant decline in Malaysian palm oil exports from May 1-25 compared to April 1-25. AmSpec Agri Malaysia estimates the decline at 18.0%, while Intertek Testing Services estimates it at 14.5%. This short-term export weakness directly reflects current demand pressure and was one of the main fundamental factors putting downward pressure on futures prices that day.
Professional traders should note that export data typically leads price movements. The slowdown in exports in May, compared to April, indicates a weakening of global buyers' willingness to purchase within the current price range. Combined with seasonal factors, changes in export data in the coming weeks will be a key indicator of demand resilience.
Competing edible oils prices weakened in tandem.
The most actively traded soybean oil contract in the Dalian market fell 0.87%, while the palm oil contract fell 0.18%. The Chicago market was closed for a holiday. As one of the world's major vegetable oils, palm oil prices are highly correlated with competing commodities such as soybean oil, as they vie for global edible oil market share. The weakness in the Dalian market that day directly impacted Malaysian palm oil futures, creating a clear cross-market linkage effect.
Crude oil prices fell more than 4% on the day, hitting a two-week low. This further reduced the attractiveness of palm oil as a feedstock for biodiesel. The substitution relationship between crude oil and palm oil is evident in their energy properties; lower crude oil prices typically weaken industrial demand for palm oil.
Indonesian supply dynamics and domestic price changes
Data released by the Indonesian Palm Oil Association (GAPKI) shows that Indonesia's palm oil exports in March totaled 2.17 million tons, down from 2.88 million tons in the same period last year. While the overall supply remains relatively abundant, the slowdown in exports echoes the data from Malaysia.
Furthermore, the price of fresh fruit bunches (FFB) in Indonesia has seen a significant decline at the farmer level, following the government's announcement of a plan to export commodities through a unified channel of central state-owned enterprises, which put pressure on the local spot market. This policy adjustment may affect the export pace of Indonesian palm oil in the medium term, and traders need to continue to monitor the impact of subsequent implementation details by the Indonesian government on actual export volumes.
The strengthening of the ringgit has increased cost pressures.
The Malaysian ringgit, the currency used to price palm oil, appreciated by 0.38% against the US dollar on the day. The stronger exchange rate increased procurement costs for buyers holding foreign currency, further suppressing demand. This factor, along with weak export data, constituted a short-term bearish combination.
In summary , the current market focus is shifting from the supply side to demand-side verification. Declining export data, weakening competing edible oils, and falling crude oil prices have combined to suppress palm oil prices in the short term. However, from a longer-term perspective, the global vegetable oil supply and demand pattern still has seasonal variables. Traders need to pay attention to subsequent monthly export updates from Malaysia and Indonesia, as well as the dynamics of competing edible oils in the Dalian and Chicago markets. These data will be important indicators for judging whether a trend shift in the price center is occurring.
In the current environment, professional traders should closely monitor the impact of MYR exchange rate fluctuations on export competitiveness, as well as the transmission of geopolitical news in the oil market to energy attributes. In the coming week, the daily cumulative data updated by export inspection agencies will be worth close monitoring, as marginal changes in this data may become a leading signal of a shift in market sentiment.
Frequently Asked Questions
What were the main reasons for the decline in Malaysian palm oil futures on May 25?
The decline was mainly dragged down by falling prices of competing edible oils in Dalian, a sharp drop in crude oil prices, and a significant decline in Malaysian export data for May. The FCPO August contract fell 0.31% to 4472 ringgit.
How did Malaysia's export data perform in May?
Exports from May 1-25 declined compared to the same period in April, with AmSpec estimating a drop of 18.0% and Intertek estimating a drop of 14.5%, indicating short-term demand pressure.
What are the latest changes in Indonesian palm oil exports and domestic prices?
March exports totaled 2.17 million tons, a year-on-year decrease; at the farmer level, the price of fresh fruit bunches fell due to the government's policy of unifying export channels.
How does the decline in crude oil prices affect palm oil?
Lower crude oil prices have reduced the attractiveness of palm oil as a feedstock for biodiesel, weakening its industrial demand support.
What does a stronger ringgit mean for the market?
The 0.38% appreciation of the ringgit increased costs for foreign currency buyers, dampening their purchasing intentions and creating a short-term negative impact in conjunction with weak exports.
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- 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.
