On Wednesday (September 9), the benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange closed at 4,967 ringgit per tonne, down 9 ringgit, or 0.18%, from the previous trading day. This marked the second consecutive day of decline for the contract, with significant profit-taking pressure emerging as it approached the psychologically important psychological level. On the same trading day, Brent crude oil futures broke through $100 per barrel, marking the first time it had reached this psychological level since July 24, but the edible oil market did not follow suit, instead focusing on a correction and consolidation. Traders tended to reduce risk exposure ahead of key reports, leading to a short-term consolidation phase in the market.

Profit-taking and bullish trend judgment coexist.

Paramalingam Supramaniam, director of brokerage firm Pelindung Bestari, believes that while intermittent profit-taking is still likely in the market, the broader trend remains bullish, driven by El Niño and anticipated insufficient rainfall. He points out that the market is also awaiting data from the Malaysian Palm Oil Board (MPOB) for clearer supply and demand guidance. This statement highlights the current contradictory structure of the market: short-term funds are taking profits after consecutive gains, while medium-term bulls based on expectations of production contraction have not exited. Looking at the market performance, the declines over the past two days have not exceeded 0.2%, and trading volume has not shown a panic-driven surge, indicating that the price pullback is more of a position adjustment than a trend reversal. If subsequent weather models continue to confirm drought in producing regions, expectations of supply contraction may regain control of pricing power.

Crude oil breaking $100 and Indonesian B50 raising demand anchor

Brent crude oil rose to a more than six-week high as renewed tensions in the Middle East heightened the risk of supply disruptions. The stronger crude oil prices directly improved the economics of palm oil in the biodiesel sector, theoretically attracting more industrial buying. Meanwhile, Indonesia's Ministry of Energy disclosed at a parliamentary hearing that the country had consumed 10.7 million kiloliters of palm oil-based biodiesel from January to early September, and a nationwide B50 blending policy was being promoted. This consumption scale indicates that domestic palm oil demand in Indonesia remains rigid, while export supply is correspondingly tightening. This dual support on the demand side limited the downside potential of palm oil during profit-taking. On the same day, Dalian palm oil futures fell 1.09%, soybean oil fell 0.73%, while Chicago Board of Trade soybean oil rose 0.35%. This cross-market divergence suggests that the edible oil sector did not experience systemic selling pressure, and the Malaysian market correction was more a matter of its own rhythm. The 0.27% depreciation of the ringgit against the US dollar also slightly reduced the procurement costs for foreign buyers denominated in US dollars, providing a mild buffer for demand.

MPOB data and weather windows become the short-term focus.

The MPOB is expected to release its August supply and demand data on September 10th, Beijing time. Since the August data may not fully reflect the actual impact of El Niño on production, the report's inventory increase and export performance will be used by the market to verify the strength of the previous upward trend. If inventory increases exceed expectations, short-term downward pressure may continue; if inventory growth is moderate or even lower than expected, production cut expectations and biodiesel demand will regain dominance in trading. Another variable that needs continuous monitoring is rainfall data in producing regions. The impact of El Niño on palm oil production typically lags by several months, so the recovery in production after September will determine whether the medium-term upward trend can continue. Overall, the current market is in a tug-of-war between short-term profit-taking and medium-term supply contraction expectations, which may increase price volatility, but the underlying bullish trend remains intact.

Frequently Asked Questions

Why did palm oil prices fall for two consecutive trading days? Mainly driven by profit-taking. After the previous price increase, long positions held significant unrealized profits, and traders tended to reduce positions before the MPOB data release, leading to consecutive days of decline. However, the decline was limited and did not break the medium-term trend. How does El Niño affect palm oil prices? El Niño often causes less rainfall in Southeast Asia, affecting palm fruit bunch growth and oil yield, leading to a decline in production in the coming months. The market prices in advance based on expectations of reduced production, thus supporting longer-term contracts, but the actual production figure needs time to be verified. What impact does Indonesia's B50 policy have on the supply and demand pattern? B50 requires a higher biodiesel blending ratio, increasing domestic palm oil consumption in Indonesia and reducing the amount available for export. Consumption from January to early September reached 10.7 million kiloliters, indicating strong industrial demand, tightening global export supply and supporting prices. Why has the MPOB data become a short-term focus? August supply and demand data can verify inventory changes and export levels, and is a key indicator for judging the tightness of palm oil fundamentals. The market tends to wait and see before the data release. If the inventory increase is lower than expected after the release, bulls may regain momentum; otherwise, downward pressure will increase. What does crude oil breaking through $100 mean for palm oil? Rising crude oil prices improve the economics of biodiesel, making palm oil more attractive as a raw material and increasing industrial demand. At the same time, stronger crude oil prices often drive up the valuation of the edible oil sector, providing downside support for palm oil prices.