On Thursday (October 8), palm oil futures on the Malaysian Derivatives Exchange ended two consecutive days of decline, with the benchmark December contract closing at 4,663 ringgit per tonne , up 139 ringgit on the day, a gain of over 3%. Buying during the session was mainly driven by increased purchases from India, logistical disruptions to sunflower seed oil from the Black Sea, and market speculation that Malaysia's budget on Friday might involve adjustments to export tariffs. David Ng, a trader in Kuala Lumpur, said that stronger crude oil prices, rising vegetable oil prices in Dalian, and anticipated Indian demand jointly drove the rebound. He expects short-term support for crude palm oil at 4,500 ringgit per tonne and resistance at 4,700 ringgit per tonne .

India's procurement pace is accelerating, with Black Sea logistics becoming a key variable.

In just three trading days this week, India has purchased 150,000 tons of crude palm oil , with shipments covering November and December. A distributor at a global trading firm in Mumbai pointed out that shipments of sunflower oil from the Black Sea region are still being disrupted by the ongoing Russia-Ukraine conflict, and logistical problems are worsening. India will have to fill the gap left by sunflower oil shortages with palm oil. This substitution logic was the most direct driver of the day's market movements. Previous market concerns about high Malaysian palm oil inventories at the end of September have already been largely priced in. Anilkumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group, said the market is awaiting new directional clues, and the expectation that Malaysia may propose an exemption from export duties on crude palm oil at its budget meeting on Friday, making its exports more competitive than Indonesia's, further supported market sentiment.

Related oil and energy market linkages

The most active soybean oil contract on the Dalian Commodity Exchange rose 0.41%, while palm oil rose 0.38%; soybean oil on the Chicago Board of Trade fell 0.22%. The price spread between palm oil and competing vegetable oils continues to drive cross-commodity fund flows. In the energy sector, supply concerns persisted in major Middle Eastern oil-producing regions, shipping disruptions in the Gulf and the Strait of Hormuz increased, and US production cuts due to hurricane threats to offshore operations led to stronger crude oil futures. Rising crude oil prices increased the attractiveness of palm oil as a biodiesel feedstock , providing additional support to the vegetable oil market.

Market Focus

The core contradiction in the current market lies in whether the short-term gap created by Indian restocking demand and Black Sea logistics disruptions can offset the pressure from high Malaysian inventories. If export tariffs are implemented in Friday's budget, it will alter the export competition landscape between Malaysia and Indonesia, impacting subsequent shipping data. Simultaneously, the sustainability of the geopolitical risk premium for crude oil will determine the marginal demand for palm oil in the biodiesel sector. Traders should pay attention to the upcoming monthly supply and demand data from the Malaysian Palm Oil Board, and whether India will permanently shift its purchases from sunflower oil to palm oil. If Black Sea logistics resume, substitution demand may decline, at which point the market logic will revert to the inventory and export tax policies themselves.

Frequently Asked Questions

Q: Why did India suddenly increase its palm oil purchases? A: Shipments of Black Sea sunflower oil have been disrupted by the Russia-Ukraine conflict. As the world's largest palm oil buyer, India needs alternative sources to fill the gap in November and December shipments, as evidenced by its purchase of 150,000 tons in three days. Q: Why is the expectation of a Malaysian export tariff exemption important? A: If the exemption is implemented, the export cost of Malaysian crude palm oil will decrease, making it more price-competitive with Indonesian palm oil, potentially stimulating export demand and alleviating inventory pressure. Q: How does the rise in crude oil prices affect palm oil? A: Stronger crude oil prices improve the economics of biodiesel. As a major raw material, palm oil's industrial demand is expected to improve, thus driving futures buying. Q: Why didn't the high inventory levels in September continue to suppress prices? A: The market had already priced in the high inventory expectations. After the release of short-selling pressure, new demand clues became the main pricing driver. Q: What should we be monitoring most going forward? A: Whether the Malaysian budget will exempt export taxes, changes in Black Sea logistics, the pace of Indian purchases, and the monthly data from the Malaysian Palm Oil Board.