On Wednesday (July 2), palm oil futures on the Malaysian Derivatives Exchange (BMD) ended a two-day decline, with the main September contract FCPOC3 closing at 4,063 ringgit/ton, up 2.39% in a single day, a record high in nearly a week. Technical indicators showed that the price broke through the middle track of the Bollinger Band at 3,987 ringgit, and the MACD bar narrowed to 0.3577, indicating that short-term momentum has been restored.

Marginal improvement in supply and demand

The core driving forces of the warming market sentiment come from three aspects: the resilience of the demand side, the strengthening of related oils and fats, and the expectation of production cuts in producing areas. According to data from independent inspection agency AmSpec Agri Malaysia, Malaysia's palm oil exports in June increased by 4.3% month-on-month, while statistics from another agency Intertek showed an increase of 4.7%. Paramalingam Supramaniam, director of Selangor broker Pelindung Bestari, pointed out: "With the release of demand for replenishment by major buyers such as India and the rise in soybean oil prices, the cost-effectiveness of palm oil is being realized."

India's palm oil imports jumped to an 11-month high in June, a phenomenon directly related to low domestic inventories and relative price differentials. At the same time, data from the Indonesian Statistics Bureau showed that the country's crude palm oil and refined product exports surged 53% year-on-year in May, further confirming the recovery in demand. Chicago Board of Trade (CBOT) soybean oil prices rose 1.12% during the day, and the main soybean oil contract of Dalian Commodity Exchange rose 0.63% simultaneously. The price gap between palm oil and competing oils narrowed to below the average for the year, providing linkage support for prices.

Output variables may become a key catalyst

Although the Malaysian palm oil production data for June has not been officially released, the market has begun to trade on the expectation of production cuts. Paramalingam Supramaniam stressed: "Preliminary assessments show that production in June may decline month-on-month. If this trend is confirmed, inventory pressure will be significantly alleviated." It is worth noting that the ringgit depreciated by 0.71% against the US dollar on the same day, which objectively enhanced the competitiveness of Malaysia's palm oil export quotation.

Institutional Viewpoints

Pelindung Bestari: The current price rebound has fundamental support, but we need to be wary of the temporary pressure that may be brought about by the July production increase cycle. It is recommended to pay attention to the resistance near the 10-day moving average of 4130 ringgit.
An oilseed analyst from a well-known institution said: The sustainability of India's import demand will depend on the price difference structure between palm oil and soft oils. If the soybean oil premium continues to expand, the momentum of palm oil exports is expected to continue into the third quarter.

Logical deduction of the market outlook

In the short term, the market is switching from the pessimistic narrative of "weak demand + high inventory". However, it should be clear that the sustainability of this round of rebound remains to be verified: on the one hand, the seasonal production increase cycle in Southeast Asia has not yet ended, and if the decline in production is less than expected, it may trigger long position closing; on the other hand, crude oil price fluctuations may be transmitted to palm oil industrial demand through biodiesel policies. From a technical perspective, the previous high of 4170 ringgit will become a watershed between long and short positions, and a breakthrough requires volume cooperation.