On Monday (September 14), the benchmark palm oil contract on the Malaysian Derivatives Exchange closed higher, driven by a strong rise in crude oil prices. At the close, the November delivery FCPOc3 contract rose 39 ringgit, or 0.81%, to 4,853 ringgit per tonne . The previous trading day, the contract was pressured by weak export data, but renewed attacks on Middle Eastern energy infrastructure and frequent security incidents in the Red Sea pushed international crude oil prices up by more than 3% in a single day, injecting new bullish sentiment into the vegetable oil market. Kuala Lumpur traders said that stronger crude oil prices enhanced the attractiveness of palm oil as a feedstock for biodiesel , and market expectations for improved future biodiesel demand are rising.

The tug-of-war between bullish and bearish forces in crude oil and competing edible oils

The core driver of this round of palm oil rebound stems from supply-side shocks in the crude oil market . A new round of attacks on Saudi Arabian energy facilities, coupled with attacks on ships in Middle Eastern waters, has exacerbated market concerns about supply disruptions. Crude oil futures rose sharply, directly boosting the valuation of palm oil in terms of its economic viability in biodiesel blending. Meanwhile, soybean oil contracts on the Chicago Board of Trade rose slightly by 0.14%, providing marginal support for palm oil. However, competing oils showed mixed performance—the most active soybean oil contract on the Dalian Commodity Exchange fell 1.08%, while palm oil contracts fell 1.24%. The battle for market share between palm oil and competing oils continues, and the relative price relationships in the global vegetable oil market indicate that the upside potential for palm oil is not smooth .

Weak export data poses a short-term downward pressure.

The latest estimates from shipping surveyors show that Malaysian palm oil exports fell 11.7% to 17.5% week-on-week from September 1st to 10th . This decline exceeds the seasonal norm, reflecting a slowdown in purchasing by major importing countries after the recent price rebound. Weak exports and strong crude oil prices have created a stalemate, limiting the sustainability of a sustained unilateral rise in palm oil prices. Furthermore, the 0.15% depreciation of the ringgit against the US dollar makes ringgit-denominated palm oil cheaper for buyers holding foreign currency, which to some extent offset the negative impact of declining export demand. However, the support from exchange rate factors is relatively limited. Traders tend to characterize the current rebound as a cost-driven correction rather than a substantial improvement in demand.

Key Focus and Logical Analysis for the Future Market

Observing the current market structure, palm oil's short-term trend will continue to be anchored to crude oil price fluctuations. If geopolitical risks in the Middle East continue to escalate, profits from biodiesel blending are expected to widen further, thereby stimulating industrial demand for palm oil. However, it should be noted that the weakness in high-frequency export data has not yet turned around . If the export decline in the first half of September, as reported by shipping survey agencies, continues to widen, the upside potential for palm oil will be significantly suppressed. In the coming week, the market will focus on whether crude oil can maintain its gains and the revised export data for the first 15 days of September from Malaysia . These two factors will determine whether palm oil continues its rebound or returns to a trading range. In the absence of clear positive factors on the demand side, chasing the rally carries significant risk, and traders should be wary of the possibility of a rapid decline in palm oil prices after crude oil gives back its gains.

Frequently Asked Questions

Q: What were the main reasons for the rise in palm oil prices on September 14th? A: Primarily driven by a more than 3% surge in international crude oil prices in a single day. Attacks on Middle Eastern energy facilities and security incidents in the Red Sea triggered supply concerns, and stronger crude oil prices improved the economic viability of palm oil as a biodiesel feedstock, thus attracting buyers. Q: Why didn't weak export data prevent palm oil from rising? A: Declining exports are a negative factor on the demand side, but the surge in crude oil prices is driven more strongly by cost and sentiment factors. These two factors created a hedge, with the immediate impact of crude oil prices overshadowing the lagging effects of export data, but weak exports still limited the price increase. Q: What impact does the depreciation of the ringgit have on palm oil prices? A: The ringgit depreciated by 0.15% against the US dollar, making palm oil priced in ringgit cheaper for overseas buyers, theoretically benefiting exports. However, the depreciation was relatively small, and export survey data already showed a slowdown in purchasing, so the exchange rate benefit was offset by weak demand. Q: What key variables should be monitored going forward? A: First, whether crude oil prices can hold onto their gains; if they give back, the logic behind the palm oil rebound will weaken. Second, the revised export data for the first 15 days of September from Malaysia; if the decline continues to widen, it will reinforce expectations of weak demand. Third, the inventory and price trends of competing oils.