Palm Oil Pulls Back from 20-Month High

Malaysian palm oil futures hovered below MYR 5,000 per tonne, snapping five sessions of gains and pulling back from their highest level since December 2024. Traders booked profits amid weaker soyoil prices on the Dalian and Chicago markets. Crude oil also eased ahead of an expected announcement from Washington on potential new sanctions against Iran, reducing support for competing vegetable oils. Ample supplies added further pressure, with Malaysian palm oil inventories rising to a five-month high in July. Meanwhile, cargo surveyors estimated that palm oil shipments for August 1–20 fell between 5.5% and 13.2% from the same period in July, pointing to softer export momentum. Still, losses were limited by a weaker ringgit, while buyers in top supplier Indonesia stepped up purchases ahead of the full implementation of the B50 biodiesel mandate in October. Concerns that a developing El Niño could intensify dryness and curb output in Indonesia and Malaysia also provided underlying support.

Malaysian palm oil futures extended their gains, trading around MYR 4,990 per tonne and reaching their highest level since December 2024. The contract is also on track for its biggest weekly rise in 24 weeks, up nearly 6% so far, marking its third straight weekly advance. The rally was supported by strength in Dalian vegetable oils, while in top producer Indonesia, buyers have stepped up purchases ahead of the full implementation of the B50 biodiesel mandate in October. Meanwhile, the developing El Niño raised concerns of worsening dryness that could curb output in Indonesia and Malaysia. Still, upside was capped by ample supply, with Malaysian inventories climbing to a five-month high in July. Demand risks also weighed, as India’s refiners may favor cheaper soyoil, with record imports expected in August. Meanwhile, cargo surveyors estimated palm oil shipments during August?1–20 fell 5.5%–13.2% from the same period in July, underscoring weak export momentum.

Palm oil extended a rally to around 4,965 ringgit per tonne, reaching the highest level since December 2024, boosted by stronger biofuel demand and growing concerns over production. Indonesia started its ambitious B50 biodiesel programme, which is expected to divert more palm oil toward domestic fuel production and reduce export availability. Buyers are moving to secure supplies ahead of the programme’s full implementation in October. At the same time, dry conditions have affected plantations in Indonesia and Malaysia, raising concerns about yields. The developing El Niño weather pattern could further worsen dryness across Southeast Asia, potentially limiting production in the world’s two largest palm oil-producing countries. The USDA expects global palm oil inventories to fall to a nine-year low in the 2026/27 season. Meanwhile, disruptions to sunflower oil exports from Russia and Ukraine are encouraging buyers to turn to alternative vegetable oils, adding further support to palm oil.