On Thursday (August 13), the benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange closed at 4,724 ringgit per tonne, up 27 ringgit, or 0.57%, from the previous trading day. The contract briefly reversed its earlier losses, mainly driven by gains in soybean oil and palm oil futures on the Dalian Commodity Exchange. On the same day, the most active soybean oil contract on the Dalian Commodity Exchange rose 0.5%, palm oil rose 0.4%, and soybean oil on the Chicago Board of Trade rose slightly by 0.06%. A trader in Kuala Lumpur said that futures are expected to fluctuate between 4,650 and 4,750 ringgit, with the market awaiting new supply and demand signals. The spot market also responded positively. On August 13th, Malaysian port quotes showed that the FOB price of refined bleached and deodorized palm oil for October/November/December shipment rose by $7.50 to $1197.50 per ton, with corresponding increases in palm oil concentrate prices; the price of crude palm oil for August delivery in southern Malaysia rose by 10 ringgit to 4530 ringgit per ton. The widening premium for longer-dated contracts reflects market optimism regarding fourth-quarter demand, but near-dated prices remain suppressed by high inventory levels, resulting in a divergent term structure.

India's surge in imports becomes a key demand variable

Data released by the Solvent Extractors Association of India (SEA) on August 13 showed that India's palm oil imports reached 730,965 tons in July, an increase of approximately 50% compared to 487,846 tons in June; soybean oil imports reached 498,881 tons, an increase of 31%; sunflower oil imports reached 251,639 tons, an increase of approximately 4%; and total vegetable oil imports reached 1.53 million tons, an increase of 33%. This data represented the most significant marginal change in the market that day. Kenanga Futures stated in a report that strong pre-holiday demand from India, a major buyer, provided support for palm oil prices; however, high tropical oil inventories and uncertainty surrounding US-Iran negotiations limited further gains. Looking at the product mix, the simultaneous surge in palm oil and soybean oil imports reflects that the rebuilding of India's total vegetable oil inventory is still underway, rather than a simple substitution. As the world's largest importer of vegetable oils, India's restocking pace often determines short-term export data. Traders should note that the surge in imports may have partially priced in subsequent purchases, but holiday stockpiling in the third quarter has not yet ended, and demand remains resilient. If India's restocking demand continues, it will directly boost exports from producing countries in the coming weeks.

Divergence between supply from production areas and policy signals

Production data shows that United Malacca Bhd's crude palm oil production in July was 13,047 tons, fresh fruit bunch production was 39,045 tons, and palm kernel production was 2,570 tons. While data from a single company cannot represent the total production in Malaysia, combined with previous market expectations for a peak production season, there is still pressure on the supply side to accumulate inventory. On the policy front, Malaysia has lowered its September crude palm oil reference price to a level that can maintain a 10% export tax. This tax rate has not been further increased, and its impact on export competitiveness is neutral. The Malaysian government's failure to stimulate exports through significant tariff reductions may limit the upward slope of prices in the short term. Furthermore, on August 12, the Brazilian Supreme Court ruled in majority opinion that the "soybean ban" agreement was legal. This agreement prohibits the purchase of soybeans from deforestation areas since 2008, after farmers claimed it constituted a cartel. This ruling preserves environmental constraints on the supply chain and may limit soybean expansion in the medium to long term, indirectly providing price support for soybean oil and its substitute, palm oil, but its short-term impact is limited.

External disturbances: Energy and exchange rates exert marginal pressure.

In the energy market, crude oil prices fell on August 13th as investors assessed the prospect of weakening global demand and rising US crude oil inventories this year; the lack of progress in negotiations to close the Strait of Hormuz provided some support for oil prices. The weakening of crude oil prices reduced the attractiveness of palm oil as a feedstock for biodiesel, limiting further gains in Malaysian palm oil futures. Meanwhile, the ringgit depreciated slightly by 0.05% against the US dollar, making ringgit-denominated palm oil slightly cheaper for foreign currency buyers, providing a slight boost to exports. The weakening of crude oil and the slight depreciation of the ringgit created opposing forces, with the former suppressing biodiesel expectations and the latter improving export purchasing power. Overall, the macroeconomic environment for palm oil is more neutral to weak, unlikely to drive a trend independently. With both bullish and bearish forces intertwined, the market is generally in a range-bound trading pattern.

Transaction Perspective: The Key is Whether the Demand Narrative Can Continue

From the intraday trading perspective, Indian import data and a rebound in Dalian edible oil prices jointly propelled Malaysian palm oil to a higher close, but weakening crude oil prices and expectations of increased production inventories limited the gains. This indicates that market focus is shifting from simple supply-side contraction to demand realization and external macroeconomic disturbances. In the coming week, traders need to closely monitor the export data for the first half of August released by Malaysian shipping surveyors, as well as changes in Indian domestic edible oil inventories. If the export data confirms the sustainability of Indian imports, Malaysian palm oil is expected to break through the 4750 ringgit resistance level; if exports fall short of expectations, it may retest the 4650 ringgit support level. Furthermore, the marginal impact of crude oil prices on biodiesel demand remains significant.

Frequently Asked Questions

Question 1: Why did India's palm oil imports increase by 50% month-on-month in July? Answer: This was mainly driven by holiday stockpiling and restocking demand. Data from the Solvent Extractors Association of India shows that palm oil imports reached 730,965 tons in July, a significant increase from 487,846 tons in June. Soybean oil and sunflower oil imports also rose simultaneously. Question 2: Why did Malaysian palm oil futures close higher on August 13th? Answer: On that day, the October Malaysian palm oil contract rose 27 ringgit to 4724 ringgit, an increase of 0.57%, mainly driven by the rise in Dalian soybean oil and palm oil futures. At the same time, strong import data from India strengthened demand expectations. Question 3: What impact will the Brazilian "soybean ban" ruling have on palm oil? Answer: The Brazilian Supreme Court ruled the "soybean ban" agreement legal, upholding the ban on purchasing soybeans from deforestation areas since 2008. This ruling may limit the medium- to long-term expansion of soybean production, indirectly supporting soybean oil prices. Palm oil, as a substitute, also received some price support. Question 4: How does the decline in crude oil prices affect palm oil? Answer: The decline in crude oil prices reduces the economic viability of palm oil as a biodiesel feedstock, weakening expectations for industrial demand. Therefore, the weakness in crude oil prices limited further gains in Malaysian palm oil futures on that day. Question 5: What are the main fluctuation range and key points to watch for Malaysian palm oil futures at present? Answer: Traders expect futures to fluctuate between 4650 and 4750 ringgit. Going forward, attention will be focused on Malaysian export data for the first half of August, changes in Indian inventories, and crude oil price movements, which will determine the direction of any breakout from this range.