On Friday (October 23), the benchmark January palm oil contract on the Bursa Malaysia Derivatives Exchange closed at 4,817 ringgit per tonne, up 25 ringgit or 0.52% on the day, with a cumulative weekly gain of 1.01%, marking the third consecutive week of gains. The market was driven primarily by two factors: a 2.04% surge in the Dalian soybean oil futures contract and Brent crude oil hitting a more than five-month high during the session. These two factors combined provided price support from competing commodities and room for growth in biodiesel demand, supporting a generally strong market structure for most of the week.

Soybean oil led the gains, and palm oil followed suit with a clear underlying logic.

Dalian soybean oil saw a significant increase on the day, becoming the strongest performer in the vegetable oil sector; in contrast, Dalian palm oil futures fell slightly by 0.19%, while Chicago soybean oil declined slightly by 0.07%. This divergence indicates that the recent rise in palm oil prices was not due to a sudden positive development in its fundamentals, but rather a price correction driven by the rise in the prices of competing oils. Palm oil competes for market share with soybean oil and sunflower oil in the global vegetable oil market, and the strength of soybean oil directly increases the relative attractiveness of palm oil.

Crude oil and exchange rates provide dual marginal support.

In the crude oil market, Brent crude broke through a five-month high, amid renewed concerns about the stability of Middle Eastern energy supplies following Houthi attacks on targets within Saudi Arabia. The strength in crude oil prices is significant for palm oil, improving its cost-effectiveness as a biodiesel feedstock, especially given the ongoing B40/B35 blending policies in Indonesia and Malaysia, which are expected to boost marginal demand. Meanwhile, the ringgit depreciated by 0.05% against the US dollar on the day. Although the magnitude was limited, the slight weakening of the exchange rate made ringgit-denominated palm oil slightly cheaper for buyers holding foreign currency, providing a mild boost to exports.

MPOC provides clear price range guidance.

The Malaysian Palm Oil Council (MPOC) stated on Thursday that crude palm oil prices are expected to remain above 4,600 ringgit per tonne in November, citing strong export demand, continued biodiesel consumption, and seasonal production declines. This assessment aligns with the current market structure: the 4,600 ringgit level can be considered a short-term support level, and the current closing price of 4,817 ringgit is already above this guidance, indicating that the market has partially priced in a tightening of supply and demand in November. It's important to note that the MPOC's forecast is a near-month outlook and not a directional judgment for the longer term. If subsequent export data or production declines fall short of expectations, prices may revert to the upper limit of the guidance range.

Brazilian soybean export expectations have slightly decreased, with uncertainties remaining on the supply side in the longer term.

The Brazilian Association of Vegetable Oil Industries (Abiove) projected on Thursday that Brazil's soybean exports in 2027 will decline by 0.8% year-on-year to 113 million tons, mainly due to increased domestic crushing demand, which limits the surplus available for export. This change will have a more indirect but medium-term impact on palm oil: reduced Brazilian soybean exports mean a marginal tightening of global soybean supply, potentially supporting soybean oil prices, which will then be transmitted to palm oil through the soybean-palm oil price spread. However, this factor will only affect 2027 and will have limited impact on current near-month contracts. Traders need to differentiate the weighting of near-month drivers and far-month expectations when assessing the situation.

Key points to watch in the future

In the short term, the core anchor for palm oil prices remains the trend of Dalian soybean oil and whether crude oil can hold its five-month high. If soybean oil remains strong and crude oil does not experience a rapid pullback, palm oil is expected to continue its high-level consolidation pattern; conversely, if competing edible oils correct and the geopolitical premium for crude oil diminishes, profit-taking pressure after consecutive gains should be anticipated. In the medium term, the extent of the seasonal decline in Malaysian production in November and the pace of export shipments are key variables for validating the MPOC price guidance, and fluctuations in the ringgit exchange rate will also affect the competitiveness of export prices.

Frequently Asked Questions

Q : What is the core driver of this palm oil price increase? A: It mainly comes from the price support from the 2.04% surge in Dalian soybean oil, which improved the competitive price ratio, and the expectation of improved biodiesel demand due to Brent crude oil hitting a five-month high. There were no sudden positive developments in the fundamentals of palm oil itself. Q : What is MPOC's assessment of November prices? A: MPOC expects crude palm oil to remain above 4,600 ringgit/ton in November, based on strong export demand, continued biodiesel consumption, and seasonal production decline. The current closing price of 4,817 ringgit is already above this range. Q: Will the downward revision of Brazilian soybean export expectations have a significant impact on palm oil? A: The impact is relatively indirect and will affect the later months of 2027. The decrease in Brazilian exports to 113 million tons is mainly due to increased domestic crushing demand, which will marginally tighten global soybean supply, transmitted through the soybean-palm oil price spread, but has limited impact on near-month contracts. Q: What impact will the depreciation of the ringgit have on palm oil exports? A: The 0.05% depreciation of the ringgit against the US dollar made palm oil priced in ringgit slightly cheaper for buyers holding foreign currency, providing a mild boost to exports. However, the magnitude of this decline was small on the day, and it was more of a marginal support than a dominant factor. Q: What risk variables should we pay attention to going forward? A: We should monitor whether Dalian soybean oil can maintain its strength, whether the geopolitical premium for crude oil subsides, and whether the decline in Malaysian production and export shipments in November will meet the MPOC guidance. Profit-taking pressure after three consecutive weeks of gains should also be noted.