On Tuesday (August 18), the benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange rose 39 ringgit, or 0.81%, to settle at 4,860 ringgit per tonne, the highest closing level since December 13, 2024. Based on the exchange rate of 4.0560 ringgit to the US dollar on that day, this equates to approximately US$1,198.22 per tonne. The rise was not driven by export data from a single producing country, but rather by a combination of factors including energy, alternative vegetable oils, and policy expectations.

The linkage between energy and alternative oils forms the core support.

Anilkumar Bagani, head of commodities research at Sunvin Group, stated that Bursa crude palm oil futures are "riding the wave of bullish sentiment in competing vegetable oil and energy futures markets." He also pointed out that "the widening palm oil-diesel spread and the deep discount of palm oil also support bullish sentiment." This assessment corresponds to the logic of improved biodiesel blending profits: when palm oil is cheaper than diesel, the willingness to purchase energy increases, and vegetable oil pricing is no longer solely anchored to edible demand. Looking at the market, Dalian soybean oil futures rose 1.72%, Dalian palm oil rose 1.41%, and Chicago soybean oil rose 0.42%; crude oil also rose, due to a weakening prospect of a ceasefire agreement in the Middle East. The synchronized movement across multiple edible oil markets indicates that funds are trading on the global price ratio between vegetable oils and energy, rather than the origin story of a single commodity.

India Procurement and the Indonesian Exchange provide new marginal information

Changes in the Indian market are more timely. Traders report that India's soybean oil imports in August are expected to hit a record high due to competitive prices and increased purchases by refiners ahead of holiday demand. Meanwhile, disruptions to sunflower oil logistics caused by the Russia-Ukraine conflict are prompting buyers to shift to other oils. While the focus is on soybean oil, India is a major global buyer of vegetable oils, and changes in its purchasing structure will be transmitted to palm oil through substitution relationships, especially while holiday stockpiling is still underway. In Indonesia, the presidential spokesperson revealed that the planned "Minerals and Strategic Commodities" exchange, scheduled for launch on January 1, 2027, may include palm oil, nickel, and coal. If palm oil is included, its trade transparency, pricing mechanisms, and export policy signals could all change. Currently, this news has no direct impact on spot supply, but it has increased market attention to Indonesian policy variables. This round of price increases is heavily reliant on external variables rather than being driven by production cuts in producing regions. Going forward, it is necessary to observe whether crude oil prices can maintain their strength, the actual volume of Indian holiday purchases arriving at ports, and the impact of the Indonesian exchange's detailed rules on trade flows. If energy prices decline or Indian purchasing impulses weaken, price volatility at high levels will be significantly amplified.

Frequently Asked Questions

Why did palm oil reach a 20-month high? The direct trigger was the simultaneous rise in soybean oil, palm oil, and crude oil prices, with substitute oils and the energy sector resonating together, rather than a supply issue from a single producing region. What does the deep discount between palm oil and diesel mean? Palm oil is relatively cheaper than diesel, improving the economics of blending with biodiesel, strengthening expectations of energy-side buying, and supporting prices. Why will record soybean oil imports from India affect palm oil? India is a major global buyer of vegetable oils. Increased soybean oil purchases will tighten overall vegetable oil supply expectations through substitution, and logistical disruptions to sunflower oil will also prompt demand to shift to other oils. What impact will the Indonesian Exchange plan have on palm oil? If palm oil is included in the exchange launching in January 2027, it may change pricing transparency and trade rules, primarily affecting sentiment in the short term, while the medium-term impact depends on the implementation of detailed rules.