Palm Oil Pulls Back from 20-Month High Ahead of Holiday

Malaysian palm oil futures surged over 2-1/2% to around MYR 5,015 per tonne, extending recent gains as trade resumed after a holiday. A weaker ringgit and expectations of tighter supply underpinned sentiment, with Indonesia’s B50 biodiesel mandate set to divert more palm oil to domestic use and El Niño risks clouding output in Indonesia and Malaysia. Crude oil prices holding above USD 100 per barrel further boosted palm’s appeal as a biodiesel feedstock. In India, the world's largest palm oil consumer, August imports rose 7% month-on-month to 782,761 tonnes, the highest since February, as refiners replenished stocks ahead of the festival season between August and November. Separately, Malaysia raised its October crude palm oil reference price, keeping the export duty at 10%. However, weaker exports tempered upside momentum, with cargo surveyors estimating shipments fell between 17.8–25.6% in the first half of September compared with the same period in August.

Malaysian palm oil futures rose further, trading above MYR 4,850 per tonne, lifted by a weaker ringgit and higher crude oil prices amid persistent Middle East tensions. Supply concerns also lent support, as extra dry conditions in Indonesia and Malaysia raised risks to future output. However, gains were capped by softer edible oils on the Dalian markets. Meanwhile, August data from the industry regulator continued to paint a bearish picture, with inventories up 7.5% mom to an eight-month high, while production rose 1.4% and exports fell 7.5%. Early September shipments stayed weak, with cargo surveyors noting an 11.7–17.5% drop in exports in the first 10 days from the same period in August. In India, heavy edible oil buying has congested major ports, delaying vessel unloading as storage tanks overflow, potentially curbing near-term import demand. In China, another major buyer, August economic data was mixed, with uneven demand prospects. Markets will be closed Wednesday for holidays.

Malaysian palm oil futures hovered above MYR 4,850 per tonne, reversing recent declines amid gains in rival edible oil markets. Bargain hunting also emerged after prices hit a two-week low. Firmer crude oil, underpinned by escalating Middle East hostilities, enhanced palm’s competitiveness as a biodiesel feedstock. Supply concerns also lingered, with unusually dry conditions and reduced fertiliser use in Indonesia and Malaysia raising risks to output. Still, upside momentum was checked by bearish monthly data from the Malaysian Palm Oil Board: August inventories climbed 7.5% to an eight-month high of 2.82m tonnes, production edged up 1.4% to 1.82m, and exports fell 7.5% to 1.29?m. Meanwhile, early September shipments remained weak, with cargo surveyors reporting an 11.7–17.5% drop in exports in the first 10 days versus August. Market caution also prevailed ahead of China’s August activity data later this week, with traders eyeing demand signals from another major palm oil buyer.