The benchmark palm oil contract (December delivery) on the Bursa Malaysia Derivatives Exchange closed at 4,553 ringgit per tonne, down 57 ringgit, or 1.24%, marking its lowest closing level in 11 weeks. The market saw a clear divergence between domestic and international factors: Chicago soybean oil prices weakened, the domestic edible oil market was closed for a holiday, and the Malaysian domestic fundamentals were weighed down by both slowing exports and surging production.

Weak export data and inventory expectations weighed on the market.

Data released Wednesday by shipping surveyors Intertek Testing Services and AmSpec Agri Malaysia showed that Malaysian palm oil product exports fell 17.1% month-on-month to 28.8% in September. This decline significantly exceeded market expectations, directly shaking the bullish logic previously built on export resilience. A trader in Kuala Lumpur said that although external markets provided some support, local sentiment remained bearish due to a sharp increase in production, slowing exports, and inventories expected to exceed 3 million tons . This trader's view was highly consistent with the market trend—weak exports and production expansion together pointed to long-term inventory pressure, becoming the core basis for the bearish trend that day.

Analysts from well-known institutions predict price fluctuations within a range until the end of the year.

A prominent analyst noted on Thursday that Malaysian palm oil prices are likely to remain in the 4,500 to 5,000 ringgit range before December. The analyst cited high inventory levels as a key factor suppressing prices, noting that while El Niño may lead to lower production next year, this long-term bullish expectation has not yet offset the current pressure from accumulating inventory. This assessment aligns logically with market movements: in the short term, the market is more concerned about the risk of inventory buildup due to declining immediate exports and rising production, rather than the long-term weather premium.

Indonesian exports declined slightly; reference price provides a floor anchor.

Data released by Indonesia's Statistics Bureau on Thursday showed that the country's crude and refined palm oil exports totaled 16.13 million tons from January to August, a year-on-year decrease of 0.39%. While the decline was limited, it confirmed the assessment of a lack of bright spots in global demand. On Wednesday, Indonesia's Ministry of Trade set the October reference price for crude palm oil at $1,042.15 per ton. This official price provided a temporary bottom for the market, but was insufficient to reverse the bearish sentiment in Malaysia.

The strengthening of crude oil prices and the depreciation of the ringgit act as a hedge.

Crude oil prices rose about 2% on Thursday. Theoretically, stronger crude oil prices would increase the attractiveness of palm oil as a biodiesel feedstock, but this positive factor was overshadowed by weakness in soybean oil and sluggish local exports. The ringgit depreciated 0.2% against the US dollar, making ringgit-denominated palm oil cheaper for buyers holding foreign currency; however, exchange rate factors also failed to reverse the market trend.

Market Trading Focus and Outlook

The current market trend is clearly linked to fundamentals: rising production, declining exports, and anticipated inventory exceeding 3 million tons constitute a short-term bearish combination. Meanwhile, the anticipated long-term production cuts from El Niño, stronger crude oil prices, and a depreciating ringgit offer only limited buffer. This indicates that the market's focus is shifting from weather premiums on the supply side to immediate export and inventory verification. In the coming week, traders should closely monitor the Malaysian Palm Oil Board's upcoming monthly supply and demand report, where inventory and production data will be key indicators of the effectiveness of the 4500 ringgit support level. If inventory confirms a breakthrough of 3 million tons, the lower end of the price range may be tested; conversely, if exports show signs of recovery, market sentiment may undergo a period of correction.

Frequently Asked Questions

Q: How much did Malaysian palm oil exports decline month-on-month in September? A: Shipping survey data shows that exports fell significantly by 17.1% to 28.8% month-on-month in September. Q: What is the forecast for Malaysian palm oil prices by well-known analysts before the end of the year? A: Prices are expected to remain between 4,500 and 5,000 ringgit per ton until December, with high inventory levels being the main suppressing factor. Q: What is the reference price for crude palm oil in Indonesia in October? A: US$1,042.15 per ton, published by the Indonesian Ministry of Trade, Regulation. Q: What is the theoretical impact of the rise in crude oil prices on palm oil? A: Stronger crude oil prices increased the attractiveness of palm oil as a biodiesel feedstock, but this was offset by weak soybean oil and declining exports. Q: What key data should traders pay attention to in the coming week? A: The Malaysian Palm Oil Board's monthly supply and demand report, including inventory and production data, will guide price direction.