The collapse in crude oil prices has torn apart the last line of defense for palm oil. On the eve of the release of export data, at what price level can the bulls mount a resistance?
2026-06-24 19:27:04
On Wednesday (June 24), palm oil futures on the Malaysian Derivatives Exchange (BMD) continued their downward trend, with the most active September contract closing down 26 ringgit, or 0.56%, at 4,632 ringgit per tonne. The intraday trading range was limited to 4,622 to 4,690 ringgit. The market weakened for the second consecutive trading day, with direct pressure coming from the sluggishness of related vegetable oil markets in Chicago and Dalian, while crude oil prices slipped to a near four-month low, further withdrawing risk-on buying.
On that day, the crude oil market became the core variable dragging down the edible oil sector. Oil prices fell by more than 1%, trading near a four-month low, primarily triggered by improved expectations for navigation in the Strait of Hormuz. Information indicated that several oil tankers previously stranded in the Persian Gulf due to regional tensions were about to leave the strait, rapidly easing market concerns about supply disruptions in the Middle East and squeezing out geopolitical risk premiums. The weakening of crude oil directly impacted palm oil through the biodiesel route: with the cost benchmark for diesel declining, the economic viability of palm oil as a biodiesel feedstock was weakened, putting pressure on industrial blending demand from major producing countries such as Indonesia and Malaysia. This constituted a significant external suppression of palm oil, which currently lacks clear endogenous positive factors.
External edible oil markets failed to provide any buffer. Chicago Board of Trade (CBOT) soybean oil futures fell 0.42% on the day, while palm oil futures on the Dalian Commodity Exchange closed down 0.46%. Even a slight rebound of 0.37% in Dalian soybean oil futures couldn't reverse the overall sluggish tone of the vegetable oil sector. Palm oil is highly competitive and cooperative with soybean oil and sunflower oil in the global edible oil trade, and the weakness in the Chicago and Dalian markets was quickly reflected in the Malaysian market through arbitrage and price ratios. A trader in Kuala Lumpur noted, "The market is likely to remain range-bound at this stage, following the sluggish trends in other vegetable oil and energy markets." This statement reflects a lack of willingness among short-term funds to actively break the deadlock, with market movements driven more by cross-market risk appetite.
Renowned technical analyst Wang Tao offered a bearish outlook from a price structure perspective. He believes the benchmark palm oil contract may retrace to the range of 4574 to 4606 ringgit per ton. This target is below the current price, meaning there are no reliable stabilization signals on a technical level, and short-term selling pressure has some momentum. Considering the aforementioned traders' range assessments, the current market seems more like it's searching for lower support within a bearish atmosphere than brewing a trend reversal. Any test of this technical range will test the actual supply and demand strength in the producing regions.
Beyond external macroeconomic factors and crude oil sentiment, the supply and demand dynamics of palm oil itself are also worth considering. Major producing regions are entering a seasonal production increase cycle, and the market's sensitivity to subsequent production data from the Malaysian Palm Oil Board (MPOB) will gradually increase. The most direct variable in the short term is the export data for June 1-25, to be released by shipping survey agencies. If the decline in exports widens further compared to the previous 20 days, it will intensify selling pressure on the market, providing fundamental support for the pullback target mentioned by Wang Tao. Conversely, if export data shows a month-on-month improvement, it may attract some processing and trading buying in the 4574-4606 ringgit range, limiting further price declines.
From a medium-term perspective, whether the geopolitical premium in the crude oil market can stabilize, the pace of implementation of Indonesia's B40 biodiesel policy, and subtle changes in weather in producing regions will all be key parameters for assessing palm oil valuations. Although current technical indicators point to a downward trend, discrepancies between expectations and these variables could trigger a period of correction. For professional traders, closely monitoring high-frequency export data and the relationship between export and crude oil prices is a more pragmatic approach to capturing short-term sentiment turning points.
Why did palm oil futures fall for the second consecutive trading day on June 24?
The decline that day was the result of combined external market forces. On the one hand, crude oil prices fell by more than 1% and hit a near four-month low. News of the impending reopening of the Strait of Hormuz for oil tankers delayed there diminished the geopolitical supply premium, directly impacting the biodiesel demand narrative for palm oil. On the other hand, Chicago soybean oil and Dalian palm oil futures weakened in tandem. The weakness in competing edible oils intensified the price pressure on palm oil, leading to further reductions in open positions.
How does the weakness in crude oil prices translate into the palm oil market?
Palm oil is a core feedstock for biodiesel production, and crude oil prices determine the cost benchmark for fossil diesel. When crude oil prices fall significantly, the price difference between biodiesel and petrochemical diesel narrows, reducing the economic incentive for blending, and the market lowers its expectations for industrial demand for palm oil. This revision of expectations triggers speculative funds to exit the market or sell off, thereby depressing palm oil futures prices.
What are the near-term target ranges given by technical analysts from well-known institutions?
Wang Tao, a well-known technical analyst, pointed out that the benchmark palm oil contract may retrace to 4,574 to 4,606 ringgit per ton. This range is considered an important testing zone for the short-term downward trend, and whether it can find effective support in this area will affect the subsequent adjustment range.
How do market traders view short-term trends?
A trader in Kuala Lumpur said the market is expected to remain range-bound, lacking independent directional drivers, and its price action will closely follow changes in the vegetable oil and energy markets in Chicago and Dalian. This reflects the current cautious stance of both bulls and bears, with the market awaiting new supply and demand signals.
What variables might change the current weak trend?
The most immediate variable is Malaysia's export data for June 1-25. If the decline narrows or exceeds expectations, it could trigger short covering at the support zone. In addition, the extent of the recovery in the geopolitical premium for crude oil, the progress of Indonesia's B40 biodiesel policy implementation, and the pace of production increases in producing regions are all factors that could potentially create discrepancies in expectations. Any deviation from the current consensus in the actual performance of any variable could trigger a rapid market correction.
Crude oil price decline and the dissipation of geopolitical premiums
On that day, the crude oil market became the core variable dragging down the edible oil sector. Oil prices fell by more than 1%, trading near a four-month low, primarily triggered by improved expectations for navigation in the Strait of Hormuz. Information indicated that several oil tankers previously stranded in the Persian Gulf due to regional tensions were about to leave the strait, rapidly easing market concerns about supply disruptions in the Middle East and squeezing out geopolitical risk premiums. The weakening of crude oil directly impacted palm oil through the biodiesel route: with the cost benchmark for diesel declining, the economic viability of palm oil as a biodiesel feedstock was weakened, putting pressure on industrial blending demand from major producing countries such as Indonesia and Malaysia. This constituted a significant external suppression of palm oil, which currently lacks clear endogenous positive factors.
The fatigue of competing oil products
External edible oil markets failed to provide any buffer. Chicago Board of Trade (CBOT) soybean oil futures fell 0.42% on the day, while palm oil futures on the Dalian Commodity Exchange closed down 0.46%. Even a slight rebound of 0.37% in Dalian soybean oil futures couldn't reverse the overall sluggish tone of the vegetable oil sector. Palm oil is highly competitive and cooperative with soybean oil and sunflower oil in the global edible oil trade, and the weakness in the Chicago and Dalian markets was quickly reflected in the Malaysian market through arbitrage and price ratios. A trader in Kuala Lumpur noted, "The market is likely to remain range-bound at this stage, following the sluggish trends in other vegetable oil and energy markets." This statement reflects a lack of willingness among short-term funds to actively break the deadlock, with market movements driven more by cross-market risk appetite.
Institutional Perspectives and Technological Landscape
Renowned technical analyst Wang Tao offered a bearish outlook from a price structure perspective. He believes the benchmark palm oil contract may retrace to the range of 4574 to 4606 ringgit per ton. This target is below the current price, meaning there are no reliable stabilization signals on a technical level, and short-term selling pressure has some momentum. Considering the aforementioned traders' range assessments, the current market seems more like it's searching for lower support within a bearish atmosphere than brewing a trend reversal. Any test of this technical range will test the actual supply and demand strength in the producing regions.
Supply and demand dynamics and subsequent game direction
Beyond external macroeconomic factors and crude oil sentiment, the supply and demand dynamics of palm oil itself are also worth considering. Major producing regions are entering a seasonal production increase cycle, and the market's sensitivity to subsequent production data from the Malaysian Palm Oil Board (MPOB) will gradually increase. The most direct variable in the short term is the export data for June 1-25, to be released by shipping survey agencies. If the decline in exports widens further compared to the previous 20 days, it will intensify selling pressure on the market, providing fundamental support for the pullback target mentioned by Wang Tao. Conversely, if export data shows a month-on-month improvement, it may attract some processing and trading buying in the 4574-4606 ringgit range, limiting further price declines.
From a medium-term perspective, whether the geopolitical premium in the crude oil market can stabilize, the pace of implementation of Indonesia's B40 biodiesel policy, and subtle changes in weather in producing regions will all be key parameters for assessing palm oil valuations. Although current technical indicators point to a downward trend, discrepancies between expectations and these variables could trigger a period of correction. For professional traders, closely monitoring high-frequency export data and the relationship between export and crude oil prices is a more pragmatic approach to capturing short-term sentiment turning points.
Frequently Asked Questions
Why did palm oil futures fall for the second consecutive trading day on June 24?
The decline that day was the result of combined external market forces. On the one hand, crude oil prices fell by more than 1% and hit a near four-month low. News of the impending reopening of the Strait of Hormuz for oil tankers delayed there diminished the geopolitical supply premium, directly impacting the biodiesel demand narrative for palm oil. On the other hand, Chicago soybean oil and Dalian palm oil futures weakened in tandem. The weakness in competing edible oils intensified the price pressure on palm oil, leading to further reductions in open positions.
How does the weakness in crude oil prices translate into the palm oil market?
Palm oil is a core feedstock for biodiesel production, and crude oil prices determine the cost benchmark for fossil diesel. When crude oil prices fall significantly, the price difference between biodiesel and petrochemical diesel narrows, reducing the economic incentive for blending, and the market lowers its expectations for industrial demand for palm oil. This revision of expectations triggers speculative funds to exit the market or sell off, thereby depressing palm oil futures prices.
What are the near-term target ranges given by technical analysts from well-known institutions?
Wang Tao, a well-known technical analyst, pointed out that the benchmark palm oil contract may retrace to 4,574 to 4,606 ringgit per ton. This range is considered an important testing zone for the short-term downward trend, and whether it can find effective support in this area will affect the subsequent adjustment range.
How do market traders view short-term trends?
A trader in Kuala Lumpur said the market is expected to remain range-bound, lacking independent directional drivers, and its price action will closely follow changes in the vegetable oil and energy markets in Chicago and Dalian. This reflects the current cautious stance of both bulls and bears, with the market awaiting new supply and demand signals.
What variables might change the current weak trend?
The most immediate variable is Malaysia's export data for June 1-25. If the decline narrows or exceeds expectations, it could trigger short covering at the support zone. In addition, the extent of the recovery in the geopolitical premium for crude oil, the progress of Indonesia's B40 biodiesel policy implementation, and the pace of production increases in producing regions are all factors that could potentially create discrepancies in expectations. Any deviation from the current consensus in the actual performance of any variable could trigger a rapid market correction.
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