With the gap remaining unfilled, the race between cost collapse and demand recovery is nearing its end.
2026-06-15 18:26:16
On Monday (June 15), Malaysian palm oil futures on the Bursa Malaysia Derivatives Exchange (BMD) closed lower amid a coordinated sell-off during the Asian session. The benchmark August contract settled at 4,450 ringgit per tonne, down 25 ringgit, or 0.56%, for the day. The market opened sharply lower and then traded sideways at lower levels throughout the day, reflecting a contradictory situation: it was dragged down by sharp declines in external edible and energy prices while simultaneously seeking support from export data.
Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group, described Monday's market performance: "Futures traded sideways after a gap down opening, weighed down by a broad sell-off in energy prices, Chicago soybean oil, and vegetable oil futures during the Asian session." During the session, the Chicago Board of Trade (CBOT) soybean oil contract fell by 1.76%, the Dalian Commodity Exchange (DCE) soybean oil contract DBYcv1 fell by 0.29%, and the Dalian palm oil contract DCPcv1 saw an even more significant drop of 1.34%. Given the highly interconnected nature of the vegetable oil sector, palm oil was unable to remain unaffected.
Even more shocking was the collapse in crude oil prices. According to well-known institutions, international oil prices plummeted to a three-month low on Monday after representatives of the United States and Iran announced a preliminary agreement to end the conflict and restore navigation in the Strait of Hormuz. This collapse in crude oil prices significantly diminished expectations for the economic viability of palm oil as a biodiesel feedstock, directly weakening the price range previously supported by energy premiums.
The high-frequency export data released on the same day provided some room for discussion about a potential bottom in the market. Independent inspection agency AmSpec Agri Malaysia showed that Malaysian palm oil exports surged 23.8% month-on-month from June 1st to 15th; shipping surveyor Intertek Testing Services (ITS) recorded a 9.6% increase during the same period. Although the difference in statistical methods between the two agencies led to different absolute growth rates, they pointed to the same thing—exports were rapidly recovering in the first half of June. However, this strong export data failed to reverse the downward trend that day, with the market focusing more on the fading energy premium and the price pressure from substitute oils.
The structural changes on the demand side cannot be ignored. A major Indian industry body stated last Friday that while India's palm oil imports rebounded slightly from a four-month low in May, the total volume remained below normal levels. This was because, as the price advantage of palm oil over soybean oil narrowed, refiners shifted their purchases to cheaper soybean oil. This directly confirms the risk that if palm oil cannot maintain a sufficient price discount, demand may continue to be diverted to soybean oil.
The Malaysian Palm Oil Board (MPOB) announced on Monday that it had lowered the July crude palm oil reference price to a certain level, keeping the export tax at 10%. The price reduction essentially lowers the tax burden on exporters. Facing competition from countries like Indonesia, the policy aims to strengthen export attractiveness through cost adjustments. However, the reference price itself also confirms the current weak spot market, creating a bearish psychological atmosphere in the futures market.
Macroeconomic projections onto costs: If low oil prices persist after crude oil falls below a key range, it will not only inhibit the recovery of the POGO (palm oil and diesel price spread), but may also slow down the pace of mandatory biodiesel blending in Indonesia, potentially suppressing industrial demand expectations for palm oil.
The current palm oil market is caught between reality and expectations: high-frequency export data is sending positive signals, suggesting that post-Ramadan restocking and low inventory levels in some importing countries are driving a rebound in purchasing demand; while the sell-off in overseas edible oils and energy markets has quickly absorbed the impact of macroeconomic sentiment and geopolitical de-escalation in pricing. Under this structure, the fundamentals of palm oil itself have not deteriorated, but the pace of self-correction of price spreads needs to be monitored.
If prices continue to fall, and the discount of palm oil to soybean oil widens again, it will largely trigger the return of major buyers such as India to purchase, creating spontaneous demand-side support. Meanwhile, Malaysia has entered a production increase cycle. If production recovers smoothly and export momentum cannot maintain a growth rate of 23.8%, the arrival of an inventory inflection point may squeeze the premium. This is a key contradiction in the supply and demand logic that needs continuous monitoring. Going forward, close attention needs to be paid to weekly export inspection data, the impact of weather in US soybean producing regions on the soybean oil supply chain, and whether expectations for the recovery of shipping in the Strait of Hormuz are repeatedly revised. These variables will alternately dominate the short-term market rhythm.
Q: Palm oil export data showed a significant increase, so why did prices fall instead ? A: The export growth corresponds to improved spot market procurement, but futures pricing on that day was dominated by the simultaneous decline in external market sentiment and crude oil cost premiums. International oil prices fell to a three-month low due to the prospect of a US-Iran agreement, severely dampening expectations for palm oil biodiesel demand; at the same time, CBOT soybean oil and Dalian vegetable oil futures collectively weakened, creating selling pressure from substitutes. Short-term funds are more focused on pricing macroeconomic and comparative pressures than simply the increase in exports.
Q: Why is there a difference of more than 10 percentage points between the export growth figures for the first 15 days of June given by AmSpec and ITS ? A: The two institutions differ in their sampling scope, the ports of shipment they cover, and their statistical methods, leading to discrepancies in interim data. However, both indicate a warming trend in exports, suggesting that demand is in the process of recovery. The market usually combines the two figures to infer the export trend for the entire month; the subsequent 20-day and full-month data will further confirm the resilience of demand.
Q: What is the significance of MPOB lowering the July crude palm oil reference price ? A: Lowering the reference price allows Malaysia to reduce the tariff calculation base for exporters while maintaining a 10% export tax rate, effectively alleviating tax burdens and helping to maintain the competitiveness of Malaysian palm oil exports given the ample supply of Indonesian palm oil. However, the reference price reduction itself also reflects the recent easing in the spot market, creating a weak signal for the futures market.
Q: How much impact will India's shift to soybean oil purchases have on the palm oil market ? A: India is the world's largest importer of vegetable oils, and its demand shift has a strong marginal impact on pricing. Previously, the discount of palm oil relative to soybean oil narrowed significantly or even disappeared temporarily, leading refiners to favor buying soybean oil. If the current decline makes palm oil's price advantage reappear, Indian imports are expected to quickly rebound, thus limiting further downside potential.
Q: What variables should traders pay the most attention to going forward ? A: First, whether high-frequency export data can maintain an increase of over 20%, confirming sustained demand; second, the correction of energy premiums due to the development of crude oil and the US-Iran geopolitical situation; third, the strength of the correlation between weather in US soybean producing regions and soybean oil prices; and fourth, the race between Malaysian palm oil production recovery and exports during the peak production season, as well as marginal changes in inventory expectations. These core variables will determine the pace of the shift in bullish and bearish forces.
External oil and energy factors combined to drag down
Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group, described Monday's market performance: "Futures traded sideways after a gap down opening, weighed down by a broad sell-off in energy prices, Chicago soybean oil, and vegetable oil futures during the Asian session." During the session, the Chicago Board of Trade (CBOT) soybean oil contract fell by 1.76%, the Dalian Commodity Exchange (DCE) soybean oil contract DBYcv1 fell by 0.29%, and the Dalian palm oil contract DCPcv1 saw an even more significant drop of 1.34%. Given the highly interconnected nature of the vegetable oil sector, palm oil was unable to remain unaffected.
Even more shocking was the collapse in crude oil prices. According to well-known institutions, international oil prices plummeted to a three-month low on Monday after representatives of the United States and Iran announced a preliminary agreement to end the conflict and restore navigation in the Strait of Hormuz. This collapse in crude oil prices significantly diminished expectations for the economic viability of palm oil as a biodiesel feedstock, directly weakening the price range previously supported by energy premiums.
Signals of divergence between high export growth and narrowing price spreads
The high-frequency export data released on the same day provided some room for discussion about a potential bottom in the market. Independent inspection agency AmSpec Agri Malaysia showed that Malaysian palm oil exports surged 23.8% month-on-month from June 1st to 15th; shipping surveyor Intertek Testing Services (ITS) recorded a 9.6% increase during the same period. Although the difference in statistical methods between the two agencies led to different absolute growth rates, they pointed to the same thing—exports were rapidly recovering in the first half of June. However, this strong export data failed to reverse the downward trend that day, with the market focusing more on the fading energy premium and the price pressure from substitute oils.
The structural changes on the demand side cannot be ignored. A major Indian industry body stated last Friday that while India's palm oil imports rebounded slightly from a four-month low in May, the total volume remained below normal levels. This was because, as the price advantage of palm oil over soybean oil narrowed, refiners shifted their purchases to cheaper soybean oil. This directly confirms the risk that if palm oil cannot maintain a sufficient price discount, demand may continue to be diverted to soybean oil.
Policy fine-tuning and new changes on the cost side
The Malaysian Palm Oil Board (MPOB) announced on Monday that it had lowered the July crude palm oil reference price to a certain level, keeping the export tax at 10%. The price reduction essentially lowers the tax burden on exporters. Facing competition from countries like Indonesia, the policy aims to strengthen export attractiveness through cost adjustments. However, the reference price itself also confirms the current weak spot market, creating a bearish psychological atmosphere in the futures market.
Macroeconomic projections onto costs: If low oil prices persist after crude oil falls below a key range, it will not only inhibit the recovery of the POGO (palm oil and diesel price spread), but may also slow down the pace of mandatory biodiesel blending in Indonesia, potentially suppressing industrial demand expectations for palm oil.
The focus of the subsequent game amidst the interplay of bulls and bears
The current palm oil market is caught between reality and expectations: high-frequency export data is sending positive signals, suggesting that post-Ramadan restocking and low inventory levels in some importing countries are driving a rebound in purchasing demand; while the sell-off in overseas edible oils and energy markets has quickly absorbed the impact of macroeconomic sentiment and geopolitical de-escalation in pricing. Under this structure, the fundamentals of palm oil itself have not deteriorated, but the pace of self-correction of price spreads needs to be monitored.
If prices continue to fall, and the discount of palm oil to soybean oil widens again, it will largely trigger the return of major buyers such as India to purchase, creating spontaneous demand-side support. Meanwhile, Malaysia has entered a production increase cycle. If production recovers smoothly and export momentum cannot maintain a growth rate of 23.8%, the arrival of an inventory inflection point may squeeze the premium. This is a key contradiction in the supply and demand logic that needs continuous monitoring. Going forward, close attention needs to be paid to weekly export inspection data, the impact of weather in US soybean producing regions on the soybean oil supply chain, and whether expectations for the recovery of shipping in the Strait of Hormuz are repeatedly revised. These variables will alternately dominate the short-term market rhythm.
Frequently Asked Questions
Q: Palm oil export data showed a significant increase, so why did prices fall instead ? A: The export growth corresponds to improved spot market procurement, but futures pricing on that day was dominated by the simultaneous decline in external market sentiment and crude oil cost premiums. International oil prices fell to a three-month low due to the prospect of a US-Iran agreement, severely dampening expectations for palm oil biodiesel demand; at the same time, CBOT soybean oil and Dalian vegetable oil futures collectively weakened, creating selling pressure from substitutes. Short-term funds are more focused on pricing macroeconomic and comparative pressures than simply the increase in exports.
Q: Why is there a difference of more than 10 percentage points between the export growth figures for the first 15 days of June given by AmSpec and ITS ? A: The two institutions differ in their sampling scope, the ports of shipment they cover, and their statistical methods, leading to discrepancies in interim data. However, both indicate a warming trend in exports, suggesting that demand is in the process of recovery. The market usually combines the two figures to infer the export trend for the entire month; the subsequent 20-day and full-month data will further confirm the resilience of demand.
Q: What is the significance of MPOB lowering the July crude palm oil reference price ? A: Lowering the reference price allows Malaysia to reduce the tariff calculation base for exporters while maintaining a 10% export tax rate, effectively alleviating tax burdens and helping to maintain the competitiveness of Malaysian palm oil exports given the ample supply of Indonesian palm oil. However, the reference price reduction itself also reflects the recent easing in the spot market, creating a weak signal for the futures market.
Q: How much impact will India's shift to soybean oil purchases have on the palm oil market ? A: India is the world's largest importer of vegetable oils, and its demand shift has a strong marginal impact on pricing. Previously, the discount of palm oil relative to soybean oil narrowed significantly or even disappeared temporarily, leading refiners to favor buying soybean oil. If the current decline makes palm oil's price advantage reappear, Indian imports are expected to quickly rebound, thus limiting further downside potential.
Q: What variables should traders pay the most attention to going forward ? A: First, whether high-frequency export data can maintain an increase of over 20%, confirming sustained demand; second, the correction of energy premiums due to the development of crude oil and the US-Iran geopolitical situation; third, the strength of the correlation between weather in US soybean producing regions and soybean oil prices; and fourth, the race between Malaysian palm oil production recovery and exports during the peak production season, as well as marginal changes in inventory expectations. These core variables will determine the pace of the shift in bullish and bearish forces.
- 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.
