Malaysian palm oil futures continued their decline on Wednesday (September 23), with the most active contract falling by more than 1% on the day, marking the fourth consecutive trading day of losses. The benchmark BMD December contract dropped 42 ringgit to close at 4,768 ringgit per tonne. This market weakness is not an isolated event—since September 20, shipping data, production expectations, and the price movements of related oil grades have intertwined, pushing palm oil into a narrow trading range as it seeks to bottom out.

Fundamentals dominate: Inventories rise to 3 million tons, production grows by double digits.

The core pressure on the current market stems from the rapid accumulation of supply. Paramalingam Supramaniam, director of Selangor brokerage firm Pelindung Bestari, pointed out that the market is generally aware that ending stocks at the end of September are likely to rise to 3 million tons or slightly higher, driven by double-digit production growth, particularly in Sabah. He stated bluntly, "Demand is also weak, and the market cannot escape the influence of these two major macroeconomic variables." This assessment essentially eliminates any possibility of a rapid price increase in the short term, leaving bulls without sufficient fundamental support.

Demand side: Shrinking exports and cooling demand for biodiesel

The weakness on the demand side is equally evident. Shipping survey agencies estimate that Malaysian palm oil product exports from September 1st to 20th declined by 12.8% to 24.7% compared to the same period last month. The significant range of decline indicates that the weakening exports are not an isolated fluctuation in a single destination, but rather a contraction in overall trade flows. Meanwhile, the demand channel for biodiesel is also weakening. Lower crude oil futures prices—Saudi Arabia has begun to restore crude oil supplies through key pipelines to the Red Sea, coupled with expectations that the US-Iran conflict may be resolved diplomatically through UN talks in New York—have put downward pressure on oil prices. Weaker crude oil prices mean a decrease in the economic attractiveness of palm oil as a biodiesel feedstock, further suppressing purchasing intentions.

Related Markets: Collective Movement in the Edible Oil Sector

Palm oil has consistently followed the price movements of competing edible oils in the global vegetable oil market, vying for market share. On that day, the most actively traded soybean oil contract on the Dalian Commodity Exchange fell 0.61%, while palm oil contracts dropped 1.79%; soybean oil prices on the Chicago Board of Trade also declined by 0.97%. The price difference and correlation between soybean oil and palm oil mean that even with its own supply and demand logic, palm oil cannot remain unaffected by the weakness of its competitors. The situation in the EU is similarly pessimistic. Data from the European Commission shows that in the 2026/27 marketing year (from July to September 20), EU soybean imports totaled 2.67 million tons, a year-on-year decrease of 14%, while palm oil imports plummeted by 26% to 560,000 tons. As a major consumer market, the significant decline in EU imports provides further evidence of "weak demand."

Institutional Views and Future Focus

David Ng, a trader at Iceberg X in Kuala Lumpur, believes that the weakness in soybean oil and crude oil prices directly dragged down the recent price declines, while concerns about sluggish exports and rising inventories continued to weigh on market sentiment. He gave a clear trading range prediction: prices are expected to find support at 4,700 ringgit per tonne, while facing resistance around 4,850 ringgit. This range also roughly defines the expected volatility in the coming days. Logically, the main theme of this downward trend is quite clear—double-digit production growth coupled with double-digit export declines, leading to a passive increase in inventories, is a highly probable path. Short-term focus should be on whether the high-frequency export data released in early October can halt the decline, and the direction of crude oil prices after the recovery of Red Sea supply and the progress of geopolitical negotiations. If exports continue their current downward trend, the price center may further move towards the 4,700 ringgit support level; conversely, if marginal improvement in demand and stabilization of competing products occur simultaneously, a temporary bottom may form above the support level. The true turning signal for the market still needs confirmation of an inventory inflection point.

Frequently Asked Questions

Q1: Why did palm oil futures prices fall for four consecutive trading days? A: The core reason is the combination of rising inventory expectations and weak demand. Double-digit production growth (especially in Sabah) pushed September-end inventory to over 3 million tons, while exports from September 1-20 declined by 12.8%-24.7% year-on-year. The certainty of oversupply made it difficult for bulls to exert their strength. Q2: What does a 3 million tonne ending inventory level mean? A: This is a relatively high absolute inventory level. Combined with high production growth and weak exports, it means that destocking will be more difficult, and the upside potential for prices will be significantly suppressed, which is the main fundamental support for the current bearish sentiment. Q3: Why does the weakening of crude oil prices affect palm oil? A: The decline in crude oil prices has reduced the economic viability of palm oil as a biodiesel feedstock, weakening demand for it. On the same day, Saudi Arabia resumed supply to key pipelines, and the US and Iran were expected to resolve their differences diplomatically through UN talks, jointly lowering oil prices and thus dragging down palm oil. Q4: What impact do the declines in Dalian soybean oil and CBOT soybean oil have on palm oil? A: Palm oil is competing with other vegetable oils for global market share, and a weakening soybean oil price will drag the entire edible oil sector down. Even if palm oil has its own rationale, it's difficult for it to buck the trend and stand independently against the backdrop of simultaneous weakness in soybean oil and crude oil. Q5: What signals should we watch for in the future market? A: In the short term, pay attention to whether the high-frequency export data released in early October can stop the decline, and the direction of crude oil after the recovery of Red Sea supply and geopolitical negotiations. Before the inventory inflection point is confirmed, prices are more likely to fluctuate around the 4700-4850 ringgit range.