On Wednesday (October 14), the benchmark December crude palm oil contract on the Bursa Malaysia Derivatives Exchange closed at 4,699 ringgit per tonne, up 17 ringgit, or 0.36%, from the previous trading day, marking the third consecutive day of gains. The market was mainly driven by stronger crude oil prices and increases in soybean oil and palm oil prices in the Dalian market. Kuala Lumpur traders stated that Malaysian palm oil futures continued to track Dalian vegetable oil and crude oil prices, with external markets providing short-term direction.

Crude oil prices moved in tandem with domestic futures markets, and inventory pressure remained.

In the crude oil market, the attack on the Saudi Aramco headquarters fueled concerns about the stability of Middle East supply, causing oil prices to rise slightly. Reports also indicated that Iran was deploying new tactics targeting ships in an attempt to maintain high oil prices. The strengthening of crude oil prices increased the attractiveness of palm oil as a biodiesel feedstock, a significant external driver of the continuous rebound in Malaysian palm oil futures . In the Dalian Commodity Exchange, the most active soybean oil contract rose 0.71%, and the palm oil contract rose 0.98%; Chicago soybean oil rose slightly by 0.03%. Palm oil competes with other vegetable oils for global market share, thus the movements of Dalian Commodity Exchange and Chicago soybean oil prices clearly correlate with Malaysian palm oil prices. However, Malaysian palm oil stocks surged to 3.51 million tons in September, with production hitting a record high, exceeding market expectations and reaching levels previously considered unattainable. This data is clearly bearish, indicating that supply-side pressures have not yet subsided. The three consecutive days of gains reflect more of a short-term external market reaction than a resolution of the inventory problem. Traders need to distinguish between the rebound driver and the medium-term supply and demand situation: the current strength of Malaysian palm oil futures comes from crude oil and Dalian Commodity Exchange prices, but it is still suppressed by record inventories.

Improved exports and policy adjustments provided marginal support to demand.

Shipping surveyors estimate that Malaysian palm oil exports from October 1st to 10th increased by 33.5% to 37.7% compared to the same period last month. This significant increase, if continued into the latter part of the month, will help digest the high inventory accumulated in September. Improved exports are one of the few demand-side positive factors in the current market, and one of the reasons why the market can disregard some of the inventory-related negative factors. On the policy front, a notice released on October 14th by the Malaysian Palm Oil Board indicated that Malaysia lowered the November crude palm oil reference price, while maintaining the export tax at 10%. A reduction in the reference price usually affects the calculation of export taxes, but the unchanged tax rate means that the policy's marginal impact on exports is limited. The market is more focused on whether actual export volumes can continue to increase. If exports maintain double-digit growth throughout October, expectations for inventory reduction will rise, and the near-month Malaysian palm oil futures contract may receive stronger support; conversely, if export momentum is insufficient, record production and inventory will once again become the main trading themes.

Exchange rates and competition in the edible oil market: short-term variables cannot be ignored.

The Malaysian ringgit appreciated 0.1% against the US dollar. Palm oil trade is denominated in ringgit, and the stronger ringgit slightly increased procurement costs for buyers holding foreign currency, thus slightly dampening export demand. In competing edible oils, Dalian soybean oil and palm oil strengthened, while Chicago soybean oil only rose slightly, indicating that this round of vegetable oil rebound was not a globally synchronized surge, but rather reflected regional market linkages. For professional traders, it is necessary to pay attention to whether the geopolitical risk premium for crude oil can be sustained, whether Dalian vegetable oil can maintain its strength, and whether the ringgit will appreciate further. If crude oil gives back its gains or Dalian futures weaken, Malaysian palm oil futures may quickly give back the external premium and refocus on Malaysia's high inventory levels. In the coming week, traders need to closely monitor Malaysian production and export high-frequency data for the first half of October, as well as geopolitical news in the crude oil market. These will be important indicators for judging whether Malaysian palm oil futures can break through the current range.

The focus of market trading is shifting.

Based on current information, market focus is shifting from the single supply side to a combination of "external energy prices + export reduction + exchange rate." While record-high inventories in September are a fact, a significant increase in exports in early October is also a fact. With these two factors at play, Malaysian palm oil futures are following crude oil and domestic futures in the short term, but in the medium term, their performance will depend on whether exports can continue to absorb inventory. If export growth is maintained, inventory pressure may ease marginally; if production remains at historically high levels while exports fail to continue, the upside potential will be limited. Professional traders should not simply interpret the three consecutive days of gains as a trend reversal, but rather view it as a corrective rally driven by external markets. The key to future price direction lies in whether improvements on the demand side can be transformed from "ten-day data" into a "monthly trend."

Frequently Asked Questions

1. Why did Malaysian palm oil futures continue to rise despite record-high inventories in September? Because short-term price movements were mainly driven by stronger crude oil and rising vegetable oil prices in Dalian, with support from anticipated biodiesel demand and competition in the edible oil market. The negative impact of high inventories hasn't disappeared, but it's temporarily masked by external market sentiment. 2. What does the surge in exports in early October mean? Shipping survey data shows that exports from October 1st to 10th increased by 33.5% to 37.7% month-on-month. If this trend continues, it will help digest inventories and alleviate supply pressure. However, ten-day data fluctuates greatly, so the performance for the entire month needs to be observed. 3. What is the impact of Malaysia lowering its November reference price while maintaining the export tax at 10%? Lowering the reference price will change the basis for calculating export taxes, but the tax rate remains unchanged, so the marginal impact of the policy is limited. The market is more focused on whether actual export demand continues to improve. 4. What impact will the appreciation of the ringgit have on palm oil exports? The appreciation of the ringgit slightly increases the procurement costs for foreign currency buyers, which may slightly suppress export competitiveness. However, current export data is strong, so the exchange rate impact is temporarily secondary. 5. What variables should traders pay attention to in the coming week? Focus on the geopolitical risk premium for crude oil, the trend of Dalian vegetable oil futures, the ringgit exchange rate, high-frequency data on Malaysian October production and exports, and signs of inventory reduction. These will determine whether the rebound in Malaysian palm oil futures can continue.