On Thursday (July 3), the main palm oil contract FCPOC3 of the Malaysian Derivatives Exchange (BMD) continued to rebound, with the September contract closing at 4093 ringgit/ton, up 31 ringgit (0.76%) on the day, closing higher for the second consecutive day. Technical indicators show that the middle track of the Bollinger channel is at 3994 ringgit, and the MACD bar narrows to 4.1, and the short-term momentum has been restored. The market presents a long-short tug-of-war pattern: Dalian Commodity Exchange soybean oil (DBYcv1) and palm oil (DCPcv1) rose 0.15% and 1.22% respectively, providing support for the Malaysian market; while Chicago Board of Trade (CBOT) soybean oil (BOcv1) fell slightly by 0.05%, coupled with the decline in international crude oil prices, which suppressed the upward space of palm oil.

Fundamentals: Biodiesel demand is under pressure, and the continuous premium is prominent

The volatility of the crude oil market has become a key variable. Although international oil prices rebounded by 3% in the previous trading day, they weakened again on July 3, as the market worried that major oil-producing countries might announce an increase in production and the outlook for fuel demand in the United States was in doubt. The weakness of crude oil has weakened the economic viability of palm oil as a raw material for biodiesel, and this logic will continue to suppress prices in the short term. It is worth noting that the ringgit exchange rate against the US dollar appreciated by 0.14% on the same day, further raising the procurement costs of overseas buyers.

In contrast, the strong performance of China's oil and fat market has become a bright spot. The intraday increase of Dalian palm oil futures is significantly higher than that of similar international varieties, reflecting the differences in regional supply and demand structures. Anilkumar Bagani, head of research at Mumbai Sunvin Group, pointed out: "The bullish momentum of Chinese vegetable oil prices in the Asian session directly supported the Malaysian market." This phenomenon may be related to China's recent inventory adjustment or pre-holiday stocking demand, but we need to be vigilant about whether the continuous trading premium can continue.

Institutional view: Cautious expectations under the struggle between long and short factors

Many institutions hold a neutral to cautious attitude towards the future market. Sunvin Group believes that although the continuous trading of oil and fat provides short-term support, the weakness of Chicago soybean oil and energy markets "limits the upside of the Malaysian market." This view is consistent with the market performance - although the Malaysian market closed higher, it failed to break through the technical resistance of the previous high of 4,182 ringgits.

Data from well-known institutions show that Malaysia's palm oil exports in June increased by 5%-8% month-on-month, but the simultaneous recovery in production may offset the destocking effect. The market is waiting for official data verification in the MPOB report next week. If the inventory decline is less than expected, it may trigger long profit-taking.

Outlook for the future market: Focus on the linkage between macro and industrial policies

The current palm oil market is in a volatile stage with a "top and bottom". The upside risk mainly comes from the sustainability of Chinese demand. If Dalian Oils and Fats maintains its strength, it may drive the Malaysian market to test the 4,200 ringgit mark; the downside pressure comes from the trend of crude oil and the fluctuation of the ringgit exchange rate. Traders need to pay close attention to two signals: one is the transmission of changes in production policies of oil-producing countries on crude oil prices, and the other is the actual impact of Southeast Asian weather on palm fruit yields.