On Wednesday, August 5th, the benchmark October contract for crude palm oil futures on the Bursa Malaysia Derivatives Exchange continued its upward trend, settling at 4,704 ringgit per tonne, a slight increase of 0.17%, marking two consecutive days of gains. The direct catalyst for this rise was the market's optimistic pricing in recent strong export data. David Ng, an independent trader at Kuala Lumpur-based trading firm Iceberg X, clearly pointed out that the market's focus was on expectations of strong export performance, which constituted the main support for the day's trading. However, significant resistance was also present above, with weakness in Chicago soybean oil and crude oil futures ultimately narrowing the day's gains and failing to fully unleash the bullish momentum.

A mix of bullish and bearish factors on the demand side

The current demand drivers are very specific. Recent developments show a new marginal shift in India's edible oil purchasing patterns. According to five traders, India's edible oil imports climbed to a 10-month high in July. Refineries increased their palm oil and soybean oil purchases in anticipation of the upcoming local festive season to replenish inventories, while tight domestic supply further amplified this restocking demand. This provides direct, temporary support for prices in producing countries. On the other hand, the traditional long-term buyer, the EU, is showing signs of contracting demand. Real-time data released by the European Commission shows that in the first five weeks of the 2026/27 marketing year, starting July 1st, EU soybean imports plummeted by 50% year-on-year to 660,000 tons, while palm oil imports also shrank by 31% to only 190,000 tons. This divergence in demand patterns—weak in the West and strong in the East—suggests that traders should not linearly extrapolate India's high-intensity purchasing as a global demand recovery.

Related varieties' coordinated suppression

Despite the relative strength of Malaysian palm oil prices, which stood apart from competing edible oils, weak external signals remained a persistent risk factor. On the same day, the main soybean oil contract on the Dalian Commodity Exchange fell 0.07%, while soybean oil on the Chicago Board of Trade rose slightly by 0.25%, but the previous day's weakness still dampened bullish sentiment during the Asian session. David Ng specifically warned that weak soybean oil and crude oil prices would continue to suppress market sentiment. This reveals that the sector-wide linkage effect in the vegetable oil market is compressing the unilateral upward potential of palm oil. On the energy side, although geopolitical uncertainties persist, the rise in crude oil prices that day was driven by a reactive response to the Red Sea situation—the Houthi rebels claimed to have attacked a Saudi oil tanker, briefly triggering a risk premium. In this fluctuation, palm oil did not show a keen correlation with short-term crude oil movements, instead being more pressured by the previous overall low-level fluctuations in crude oil prices. Its economic considerations as a biodiesel feedstock remain the underlying logic for long-term valuation. Meanwhile, the ringgit weakened slightly by 0.12% against the US dollar, providing a minor cost advantage for foreign currency buyers, but not enough to constitute a trend of buying.

Future logical deduction and observation focus

Looking ahead, the core contradiction in the market will likely focus on the realization of export expectations. Whether the purchasing momentum during India's festive season can offset the demand gap caused by the contraction in EU imports will determine the direction of the price center. The key to the trading logic is that the current market is trading more on "export expectations" than "confirmed destocking." If subsequent high-frequency shipping data fails to consistently show strong shipments exceeding seasonal norms, the possibility of a market pullback and correction will increase significantly. In addition, investors need to closely monitor changes in South American soybean oil supply pressure and the central level of international oil prices, as these two external variables remain the ceiling for determining the absolute price level of palm oil.

Frequently Asked Questions

Question 1: Why did Malaysian palm oil futures still close higher despite weakness in external edible oils and crude oil? Answer: The rise in Malaysian palm oil prices that day was almost entirely driven by strong export expectations. The market digested news of India's significant increase in purchases in preparation for the festive season, with its July imports hitting a 10-month high, which in the short term outweighed the negative impact from weak Chicago soybean oil and crude oil prices. This is a typical example of an independent market supported by a surge in regional demand, but the limited gains also reflect the existence of external pressures. Question 2: What is the divergent pattern in demand between India and the EU? Answer: A significant "weak in the West, strong in the East" trend is observed. In India, stimulated by both festive restocking demand and tightening domestic supply, palm oil and soybean oil imports reached multi-month highs in July, making India the most active buyer in the current market. In the EU, according to data up to August 2nd, palm oil imports in the first few weeks of the 2026/27 season decreased by nearly 30% year-on-year, indicating a slowdown in demand affected by macroeconomic factors and inventory strategy adjustments. Question 3: Why did the rise in crude oil prices due to geopolitical events fail to effectively boost palm oil prices? Answer: Although news of the Houthi attack on a Saudi oil tanker caused a rise in crude oil prices during the day, the palm oil market reacted coldly. This is because the oil price fluctuations triggered by this geopolitical conflict are more characterized by short-term emotional factors and have failed to change market concerns about the overall weakness of crude oil prices. In terms of biodiesel profit calculations, the market is more focused on sustainable crude oil price trends; therefore, the "biodiesel feedstock" logic was not activated that day. Question 4: What assessments have analysts given regarding the current sentiment in the palm oil market? Answer: David Ng, a trader at Iceberg X, provided a crucial two-way assessment. He affirmed the direct impact of strong export data on the market, but also clearly warned of risks, pointing out that weak soybean oil and crude oil prices are "headwinds" hanging over market sentiment. This reflects the current cautious bullish sentiment of professional institutional traders, who are highly concerned about the resistance levels above. Question 5: What are the main observation points that will determine the future price trend of palm oil? Answer: The core observation point is whether "expectations" can successfully translate into "reality." That is, whether the market can see continuous strong shipping export data to confirm the current optimistic sentiment. Secondly, the potential substitution pressure from the arrival of South American soybean oil and the shift in the center of gravity of international crude oil prices will be key external variables affecting the ceiling of palm oil prices. If subsequent export data falls short of expectations, the market may face a correction of the "demand premium" at any time.