On Wednesday (August 19), the November contract for crude palm oil futures on the Malaysian Derivatives Exchange closed at 4,893 ringgit per tonne , up 33 ringgit, or 0.68%, marking a new closing high in over 20 months and the third consecutive trading day of gains. Based on the exchange rate of 4.0530 ringgit to 1 US dollar on that day, this is equivalent to approximately US$1,207.25 per tonne. The market continued its recent strong performance, with overall risk appetite in the vegetable oil sector remaining on the rise.

Alternative oils strengthen the upward trend.

On the same day, the main soybean oil contract on the Dalian Commodity Exchange rose 1.19%, and the palm oil contract rose 0.99%; soybean oil on the Chicago Board of Trade also strengthened by 0.82%. Palm oil, along with soybean oil and rapeseed oil, belongs to the global vegetable oil supply pool. Changes in price differences directly trigger demand substitution; therefore, the rise in external edible oil prices has raised the central price of palm oil. This round of price increases is not driven by a single producing region, but rather by the overall strength of the vegetable oil sector. Current prices are at a 20-month high, and after continuous increases, the market's sensitivity to marginal news has clearly increased.

Trader and institutional views

A Kuala Lumpur trader said prices are expected to remain supported by strong performance in competing vegetable oil and energy markets, keeping the overall market tone firm; however, he added that a pullback or profit-taking could not be ruled out after the recent sharp rise. This statement reflects the coexistence of short-term momentum and the risk of high-level volatility. The Malaysian Palm Oil Council (MPOC) stated that Malaysian crude palm oil prices are expected to remain above 4,600 ringgit per tonne in September, influenced by tightening supply and disruptions to global trade flows. Compared to the current November contract closing price of 4,893 ringgit, this forecast is about 6% lower than the current price. This indicates that institutions maintain a bullish outlook on September prices, but have not completely ruled out the possibility of a price pullback from the highs, with 4,600 ringgit being regarded as an important reference area by the market.

Spillover effects of the energy market

Crude oil prices rose slightly in early trading on Wednesday, marking their fourth consecutive day of gains, as the market weighed conflicting signals from Tehran and Washington regarding the status of navigation in the Strait of Hormuz. The rise in crude oil prices impacts palm oil through two pathways: improved expectations for biodiesel feedstock demand and increased energy and vegetable oil logistics costs. If supply uncertainty in the Middle East persists, energy premiums may continue to be passed on to the vegetable oil market; conversely, if navigation expectations become clearer, a decline in geopolitical premiums will weaken additional support for palm oil.

Logical continuity and follow-up attention

The current market is still driven by a confluence of tightening supply, strong performance of substitute edible oils, and energy premiums. With prices approaching 4900 ringgit, short-term positive factors have been largely priced in, and further upward pressure is needed to digest the high-level pressure. Future focus will be on the Malaysian Palm Oil Board's inventory and production data, changes in Indonesian export policies, the purchasing pace of major consuming countries, and the impact of the Strait of Hormuz situation on crude oil premiums. If inventory declines fall short of expectations or geopolitical premiums subside, palm oil may enter a period of consolidation; however, the MPOC's September forecast remains above 4600 ringgit, indicating a certain consensus among institutions regarding support levels.

Frequently Asked Questions

Question 1: Why has palm oil risen for the third consecutive trading day? The core reason is the simultaneous strengthening of the alternative oils and energy markets. Dalian soybean oil, palm oil, and Chicago soybean oil all rose, raising the overall global vegetable oil pricing center, with palm oil following suit. Question 2: Where is the current price? The November contract closed at 4893 ringgit/ton, a new closing high in over 20 months, equivalent to approximately $1207.25/ton. Prices have entered a high range in recent years, and the market is more sensitive to news changes. Question 3: What do traders think about the short-term trend? Kuala Lumpur traders believe that prices are still supported by competing vegetable oils and energy markets, with an overall bullish tone; however, the recent gains have been significant, and a pullback or profit-taking cannot be ruled out, increasing short-term volatility risk. Question 4: What is the Malaysian Palm Oil Council's assessment of September prices? The council expects Malaysian crude palm oil prices to remain above 4600 ringgit/ton in September, citing tighter supply and disruptions to global trade flows, reflecting a consensus among institutions regarding support levels. Question 5: What variables should we pay attention to going forward? We should focus on Malaysian Palm Oil Board inventory and production data, Indonesian export policies, the purchasing pace of major consuming countries, and the impact of the Strait of Hormuz situation on crude oil premiums. These variables will determine whether high prices can be sustained.