On Thursday (September 10), the benchmark November palm oil contract on the Bursa Malaysia Derivatives Exchange closed at 4,885 ringgit per tonne, down 81 ringgit from the previous trading day, a decrease of 1.63%, marking the third consecutive day of decline. Market commentary from a well-known institution indicated that weakness in competing soybean oil and bearish data from the Malaysian Palm Oil Board (MPOB) jointly suppressed the market, resulting in a clearly bearish sentiment.

MPOB data and weak exports exert double pressure.

The latest MPOB report shows that Malaysian palm oil stocks rose to an eight-month high in August, while production climbed to its highest level since December last year, and exports declined. Cargo surveyors subsequently estimated that Malaysian palm oil product exports fell 11.7% to 17.5% month-on-month from September 1st to 10th. David Ng, a proprietary trader at Kuala Lumpur-based trading firm Iceberg X Sdn Bhd, noted, "The market decline was mainly due to weaker soybean oil prices. The MPOB data was also bearish, with the month-on-month increase in stocks exceeding market expectations. Weak exports coupled with increased production are the main reasons for the inventory accumulation." This assessment aligns with market trends—lack of bright spots on the export side, and the seasonal recovery in production not yet over, making inventory accumulation the most direct source of downward pressure.

The tug-of-war between competitive oils and crude oil

External edible oil markets also weakened. The most active soybean oil contract on the Dalian Commodity Exchange fell 0.64%, and palm oil fell 1.37%; soybean oil on the Chicago Board of Trade fell 0.55%. As a crucial component of the global vegetable oil market, palm oil pricing is highly correlated with soybean oil, sunflower oil, and other commodities. Weakness in competing edible oils directly reduced palm oil buying. On the other hand, crude oil prices continued their upward trend, with Brent crude breaking through $100 per barrel in the previous trading day, as traders' concerns about shipping disruptions following the escalation of the conflict between Iran and the United States intensified. Stronger crude oil usually increases the attractiveness of palm oil as a biodiesel feedstock, but this trading day failed to reverse the decline in palm oil prices, indicating that bearish fundamentals temporarily prevail. Furthermore, the ringgit appreciated by 0.17% against the US dollar, making palm oil slightly more expensive for buyers holding foreign currency, further suppressing export demand.

Market Outlook and Logical Analysis

The current core contradiction in the market lies in the race between the speed of export recovery and the pace of production growth . After the surge in inventories in August, the market needs to see if exports can stop falling in September; otherwise, inventory pressure will continue to suppress the rebound potential. Strong crude oil provides potential bottom support, but if soybean oil continues to weaken, palm oil will find it difficult to remain unaffected. The ringgit's performance is also crucial; if it continues to appreciate, the price advantage of Malaysian palm oil in the international market will be eroded. Although the current bearish sentiment is strong, the high level of crude oil and the expected seasonal production inflection point may limit the downside. Going forward, it is necessary to closely monitor high-frequency export data from cargo survey agencies and production forecasts before the next MPOB report. Overall, the short-term logic remains dominated by inventory pressure , and any rebound requires a clear improvement signal from the export side.

Frequently Asked Questions

Q: Why was the MPOB data interpreted as bearish? A: August inventories rose to an eight-month high, production was at its highest level since December last year, but exports declined. Both supply and demand factors contributed to the inventory accumulation, exceeding market expectations. Q: How large was the export decline in September? A: Cargo survey agencies estimate that Malaysian palm oil product exports fell by 11.7% to 17.5% month-on-month from September 1st to 10th. Q: Why didn't the rise in crude oil prices support palm oil? A: Stronger crude oil prices boosted expectations for biodiesel feedstock demand, but weak soybean oil and bearish MPOB data exerted stronger downward pressure. Short-term fundamental factors outweighed the support from crude oil. Q: What impact will the appreciation of the ringgit have on palm oil? A: The ringgit appreciated by 0.17% against the US dollar, making palm oil more expensive for overseas buyers, which may suppress export demand and exacerbate downward price pressure. Q: What variables should we pay attention to in the future? A: High-frequency export data, seasonal changes in production, the sustainability of crude oil prices, and the direction of the ringgit exchange rate will determine whether inventory pressure can be alleviated.