On Wednesday (July 29), Malaysian crude palm oil futures on the Bursa Malaysia Derivatives Exchange (BMD) rebounded technically after falling a cumulative 1.67% over two consecutive trading days. The benchmark October contract closed at 4,663 ringgit per tonne, up 21 ringgit, or 0.45%. The day's trading was mainly driven by bargain hunting triggered by a rebound in the energy market, while purchasing interest from the Indian physical market also provided additional support for prices.

Demand signals are relatively positive, with export growth becoming the focus.

Anilkumar Bagani, Head of Commodity Research at Sunvin Group, pointed out that crude oil and palm oil futures rose on the day due to bargain hunting, driven by a rebound in energy prices and strong physical coverage of palm oil from India. He also emphasized, "The optimistic growth in Malaysian palm oil exports so far this month has also supported prices." Data released by shipping surveyors confirmed this assessment—Malaysian palm oil product exports increased by 8.1% to 15.9% month-on-month from July 1 to 25, a surge that temporarily eased market concerns about weak demand. However, traders are still watching whether the export growth rate can be maintained throughout the month, as this directly relates to the expected difference in month-end inventory changes.

Increased production pressure and policy uncertainty together limit price increases

Despite strong export data, the market did not see a significant surge in trading volume. Bagani added that the anticipated increase in production from July 1st to 20th , coupled with the unresolved allocation of Indonesia's B50 biodiesel quota , limited the price increase. These two factors constitute the core of the current battle between bulls and bears: the seasonal production increase cycle is suppressing price expectations from the supply side; and the lack of clarity regarding the implementation details of Indonesia's higher blending targets has temporarily deprived bulls, who were hoping for an explosive growth in biodiesel demand, of a crucial catalyst. If there are setbacks in the B50 policy's allocation mechanism or implementation timeline, it could lead to a repricing of some bullish positions.

The surge in crude oil prices is linked to external edible oil prices.

The crude oil market experienced significant volatility today, with prices jumping over 3%, primarily driven by the sudden escalation of tensions in the Middle East. A decline in US crude oil inventories also reinforced the short-term bullish sentiment. The strengthening of crude oil directly improved the price competitiveness of palm oil as a biodiesel feedstock, making it easier for energy-related hedging funds to participate in the futures market. Among competing edible oils, palm oil contracts on the Dalian Commodity Exchange recorded a 0.64% increase, while soybean oil contracts fell slightly by 0.23%; soybean oil prices on the Chicago Board of Trade were almost flat, rising only 0.04%. This divergence indicates that funds within the vegetable oil sector are trading more on the short-term positive factors for palm oil itself, rather than on a systemic increase in overall demand expectations. Additionally, the Malaysian ringgit strengthened slightly by 0.05% against the US dollar, theoretically increasing costs for foreign currency buyers, but compared to the disturbances in crude oil and export data, this exchange rate fluctuation had almost no substantial impact on the market.

EU imports plunge and gap between forward and expected months

Data released by the European Commission shows that as of July 26, 2026, the EU's cumulative soybean imports for the 2026/27 marketing year totaled 560,000 tons, a 39% year-on-year decrease; palm oil imports also fell by 39% , to only 130,000 tons. This significant reduction is not accidental, reflecting the ongoing adjustment in the EU's edible oil consumption structure and the further tightening of sustainability standards. While this trend has not yet directly dampened trading sentiment in the Asian market, as time goes on, if major buyers such as India weaken their replenishment efforts, the redistribution of global palm oil trade flows could trigger changes in the pricing efficiency of longer-term contracts. This data raises a concerning question mark regarding the medium- to long-term demand outlook. In summary, strong short-term exports and robust crude oil prices have provided a foundation for a palm oil rebound, but uncertainties surrounding production growth and the B50 policy limit upside potential, while the contraction in EU demand in the long term adds a potential variable to the balance sheet in the second half of the year.

Frequently Asked Questions

Why did palm oil futures rebound after a continuous decline?
The gains were primarily driven by two factors: first, a sharp rebound in energy prices improved expectations for palm oil biodiesel demand, triggering bargain hunting; second, positive sentiment in Indian physical purchases, coupled with a significant month-on-month increase in exports in the first 25 days of July, restored market confidence in short-term demand. What factors limited the day's gains?
Analysts at Sunvin Group pointed out that the estimated production increase from July 1st to 20th compared to the previous period indicates that seasonal production pressures are materializing; meanwhile, the delayed allocation of Indonesian B50 biodiesel quotas has dashed expectations of a surge in demand, both factors contributing to suppressed upward price elasticity. Why is the Indonesian B50 policy so crucial to market conditions?
Indonesia is the world's largest producer and consumer of palm oil. The B50 refers to a mandatory target of blending 50% biodiesel into diesel fuel. If this policy is fully implemented and its allocation is clearly defined, it will significantly boost domestic palm oil consumption and alter the magnitude of the global supply spillover. The current lack of allocation means that this potential demand has not yet been factored into prices, and the market still needs to wait for a clear signal. What is the correlation between crude oil and palm oil?
Palm oil is a key feedstock for biodiesel. Rising crude oil prices increase fossil fuel costs, thus improving the economics of biodiesel and attracting more palm oil to the energy sector. This substitution effect causes a positive correlation between the prices of the two commodities at certain stages, attracting trading funds to diversify across different commodities. What signal does the decline in EU import data send?
EU palm oil imports declined by 39% year-on-year, indicating a potential ongoing adjustment in its edible oil import structure and a reduced reliance on palm oil. While this hasn't directly impacted Asian markets in the short term, if subsequent demand growth in major consuming regions is concentrated in India and fails to sustain, the long-term market may face pressure to rebalance trade flows.