After palm oil prices fell to a two-week low, the market awaited an unavoidable answer.
2026-06-09 18:45:53
On Tuesday (June 9), the benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed at 4,527 ringgit per tonne, down 48 ringgit, or 1.05%, on the day. This closing price marked the lowest level since May 26, completely erasing the gains of the previous trading day. Market sentiment weakened again under the pressure of persistently weak export demand.
Weak exports dominate short-term trading logic
The core pressure in the current market stems from the export side. Malaysian palm oil product exports in May fell between 8.8% and 15.5% month-on-month, a figure previously released by several freight survey agencies. Continued weakness in demand has prevented bulls from launching an effective offensive. Paramalingam Supramaniam, director of brokerage Pelindung Bestari, pointed out that the market is in a dilemma: on the one hand, weak export data continues to weigh on momentum; on the other hand, June production has shown subtle signs of recovery. These two factors combine to exert downward pressure, making the market highly susceptible to a one-day rally similar to today's.
He is cautious about the short-term boost to the ringgit exchange rate. "While a weaker ringgit can provide some cushioning, it cannot act as a long-term shock absorber," he emphasized. "There must be substantial demand before the peak production season in the third quarter; otherwise, the market will struggle to withstand the pressure from seasonal supply increases." Data shows that the ringgit strengthened 0.29% against the US dollar on Tuesday, but had touched its lowest level since January 13 in the previous trading day. This brief stabilization in the exchange rate has not changed its structural support for export competitiveness.
Related edible oils and crude oil all weakened.
The synchronized decline in substitute markets further compressed the price range of palm oil. The most actively traded soybean oil contract on the Dalian Commodity Exchange fell 0.85% on the day, while the palm oil contract fell by 1.3%; the soybean oil contract on the Chicago Board of Trade also fell 0.27%. With major vegetable oil commodities under pressure across the board, palm oil lacked an independent basis for strengthening from the narrowing of price spreads.
Crude oil prices also released bearish signals. International oil prices gave back most of the previous trading day's gains, mainly due to Iran and Israel announcing a truce in their attacks, brokered by the United States. The weakening of crude oil futures directly diminished the attractiveness of palm oil as a biodiesel feedstock, a logic particularly pronounced given the current amplified volatility in crude oil prices. Analysts from well-known institutions believe that if crude oil prices fail to regain their upward momentum, the premium for industrial demand in palm oil will be further compressed.
MPOB Report Becomes a Key Variable
The Malaysian Palm Oil Board (MPOB) will release its monthly supply and demand report this Wednesday, which is currently the most closely watched event in the market. Leading institutions predict that May production may find a balance between seasonal recovery and the impact of previous rainfall, while the sharp drop in exports means that month-end inventories are likely to rise month-on-month. There is significant disagreement in the market regarding the extent of inventory accumulation presented in the report: if the inventory increase exceeds expectations, the market may face further downward pressure; conversely, if the recovery in production falls short of expectations, partially offsetting weak exports, the current price range is likely to find support.
It is worth noting that early signs of a production recovery in June have begun to be picked up by the market. The "subtle signs of recovery" mentioned by Supramaniam point to improved weather in producing regions and a stabilizing labor supply, but this trend is still in its early stages of verification. High-frequency production data in the next one to two weeks will be a leading indicator for assessing supply pressures in the third quarter.
Short-term focus
For professional traders, the core contradiction in the current palm oil market lies in the fact that the certainty of seasonal production increases on the supply side is gradually materializing, while whether demand will trigger restocking at low prices remains uncertain. The MPOB report will provide the latest data anchor for this game. Furthermore, the movement of the ringgit after hitting its yearly low, and whether crude oil prices can stabilize at key support levels after the de-escalation of tensions in the Middle East, will all be external variables influencing short-term capital flows. The market is awaiting cross-validation from fundamentals and news to find the trigger signal for the next direction.
Why did palm oil prices hit a two-week low amid weak exports?
The core driver of the decline in palm oil futures on Tuesday was a sharp drop in May export data, with a month-on-month decrease of 8.8% to 15.5%. Coupled with signs of a recovery in June production, the combined pressure of insufficient demand and increased supply caused the market to completely erase the gains of the previous trading day and hit a low.
Why did the weakening ringgit fail to boost palm oil prices?
In theory, the depreciation of the ringgit makes palm oil, priced in US dollars, more price-competitive, but analysts point out that this buffering effect is short-term. The market is currently more concerned about the lack of actual end-user demand; if overseas buying fails to recover effectively before the peak production season in the third quarter, exchange rate factors will be insufficient to independently support prices.
How does the decline in crude oil prices affect the palm oil market?
Palm oil is a key feedstock for biodiesel. Falling crude oil prices reduce the cost of fossil diesel, thereby weakening the economics of palm oil-based biodiesel and suppressing industrial demand for it. On Tuesday, crude oil prices retreated due to easing tensions in the Middle East, further exacerbating downward pressure on palm oil prices.
Why is the MPOB monthly report the most critical event right now?
This report will provide official Malaysian palm oil production, export, and inventory data for May. The market is most focused on the extent of inventory accumulation: given the sharp decline in exports, if production recovers more than expected, inventory pressure will increase significantly, potentially triggering further price adjustments. The report's findings will provide direct guidance on short-term bullish or bearish trends.
What are the main contradictions currently facing the market?
The market is currently caught in a battle between seasonal production increases and persistently weak demand. On the supply side, June production showed early signs of recovery, and the third quarter will enter the traditional peak production period; on the demand side, export orders have not yet shown substantial improvement. This timing mismatch constitutes the core focus of the current palm oil market game.
Weak exports dominate short-term trading logic
The core pressure in the current market stems from the export side. Malaysian palm oil product exports in May fell between 8.8% and 15.5% month-on-month, a figure previously released by several freight survey agencies. Continued weakness in demand has prevented bulls from launching an effective offensive. Paramalingam Supramaniam, director of brokerage Pelindung Bestari, pointed out that the market is in a dilemma: on the one hand, weak export data continues to weigh on momentum; on the other hand, June production has shown subtle signs of recovery. These two factors combine to exert downward pressure, making the market highly susceptible to a one-day rally similar to today's.
He is cautious about the short-term boost to the ringgit exchange rate. "While a weaker ringgit can provide some cushioning, it cannot act as a long-term shock absorber," he emphasized. "There must be substantial demand before the peak production season in the third quarter; otherwise, the market will struggle to withstand the pressure from seasonal supply increases." Data shows that the ringgit strengthened 0.29% against the US dollar on Tuesday, but had touched its lowest level since January 13 in the previous trading day. This brief stabilization in the exchange rate has not changed its structural support for export competitiveness.
Related edible oils and crude oil all weakened.
The synchronized decline in substitute markets further compressed the price range of palm oil. The most actively traded soybean oil contract on the Dalian Commodity Exchange fell 0.85% on the day, while the palm oil contract fell by 1.3%; the soybean oil contract on the Chicago Board of Trade also fell 0.27%. With major vegetable oil commodities under pressure across the board, palm oil lacked an independent basis for strengthening from the narrowing of price spreads.
Crude oil prices also released bearish signals. International oil prices gave back most of the previous trading day's gains, mainly due to Iran and Israel announcing a truce in their attacks, brokered by the United States. The weakening of crude oil futures directly diminished the attractiveness of palm oil as a biodiesel feedstock, a logic particularly pronounced given the current amplified volatility in crude oil prices. Analysts from well-known institutions believe that if crude oil prices fail to regain their upward momentum, the premium for industrial demand in palm oil will be further compressed.
MPOB Report Becomes a Key Variable
The Malaysian Palm Oil Board (MPOB) will release its monthly supply and demand report this Wednesday, which is currently the most closely watched event in the market. Leading institutions predict that May production may find a balance between seasonal recovery and the impact of previous rainfall, while the sharp drop in exports means that month-end inventories are likely to rise month-on-month. There is significant disagreement in the market regarding the extent of inventory accumulation presented in the report: if the inventory increase exceeds expectations, the market may face further downward pressure; conversely, if the recovery in production falls short of expectations, partially offsetting weak exports, the current price range is likely to find support.
It is worth noting that early signs of a production recovery in June have begun to be picked up by the market. The "subtle signs of recovery" mentioned by Supramaniam point to improved weather in producing regions and a stabilizing labor supply, but this trend is still in its early stages of verification. High-frequency production data in the next one to two weeks will be a leading indicator for assessing supply pressures in the third quarter.
Short-term focus
For professional traders, the core contradiction in the current palm oil market lies in the fact that the certainty of seasonal production increases on the supply side is gradually materializing, while whether demand will trigger restocking at low prices remains uncertain. The MPOB report will provide the latest data anchor for this game. Furthermore, the movement of the ringgit after hitting its yearly low, and whether crude oil prices can stabilize at key support levels after the de-escalation of tensions in the Middle East, will all be external variables influencing short-term capital flows. The market is awaiting cross-validation from fundamentals and news to find the trigger signal for the next direction.
Frequently Asked Questions
Why did palm oil prices hit a two-week low amid weak exports?
The core driver of the decline in palm oil futures on Tuesday was a sharp drop in May export data, with a month-on-month decrease of 8.8% to 15.5%. Coupled with signs of a recovery in June production, the combined pressure of insufficient demand and increased supply caused the market to completely erase the gains of the previous trading day and hit a low.
Why did the weakening ringgit fail to boost palm oil prices?
In theory, the depreciation of the ringgit makes palm oil, priced in US dollars, more price-competitive, but analysts point out that this buffering effect is short-term. The market is currently more concerned about the lack of actual end-user demand; if overseas buying fails to recover effectively before the peak production season in the third quarter, exchange rate factors will be insufficient to independently support prices.
How does the decline in crude oil prices affect the palm oil market?
Palm oil is a key feedstock for biodiesel. Falling crude oil prices reduce the cost of fossil diesel, thereby weakening the economics of palm oil-based biodiesel and suppressing industrial demand for it. On Tuesday, crude oil prices retreated due to easing tensions in the Middle East, further exacerbating downward pressure on palm oil prices.
Why is the MPOB monthly report the most critical event right now?
This report will provide official Malaysian palm oil production, export, and inventory data for May. The market is most focused on the extent of inventory accumulation: given the sharp decline in exports, if production recovers more than expected, inventory pressure will increase significantly, potentially triggering further price adjustments. The report's findings will provide direct guidance on short-term bullish or bearish trends.
What are the main contradictions currently facing the market?
The market is currently caught in a battle between seasonal production increases and persistently weak demand. On the supply side, June production showed early signs of recovery, and the third quarter will enter the traditional peak production period; on the demand side, export orders have not yet shown substantial improvement. This timing mismatch constitutes the core focus of the current palm oil market game.
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