Palm Oil Rallies on Supply Concerns, Eyes Second Weekly Gain

Malaysian palm oil futures surged more than 3% to above MYR 4,750 per tonne, erasing prior losses and hitting a three-week high. Firmer edible oils on China’s Dalian exchange and Chicago markets boosted sentiment, while supply concerns in top producer Indonesia also added support. The Indonesian Palm Oil Association projected output to fall to 51.7 million tonnes in 2027 from 53.7 million this year, with exports seen dropping nearly 15% yoy amid rising domestic biodiesel and food consumption. Meanwhile, cargo surveyors reported Malaysian shipments jumping 33.5%–37.7% in October 1–10 from the same period in September, signaling stronger near-term demand. Robust festival buying from India, the world's largest palm oil importer, further buoyed prices. However, record-high Malaysian inventories and growing caution ahead of Q3 GDP data next week in China, a major palm oil consumer, tempered gains. For the week, futures were on track for a second straight advance, up about 3.9% so far.

Malaysian palm oil futures retreated after recent gains, slipping below MYR 4,700 per tonne amid weaker edible oils on China’s Dalian exchange and lower crude oil prices, which reduced palm oil’s appeal as a biodiesel feedstock. Sentiment was also weighed down by renewed concerns over record-high inventories, which climbed to 3.51 million tonnes in September amid peak seasonal production, according to the Malaysian Palm Oil Board (MPOB). Meanwhile, China’s strong September trade surplus and import growth have been supported largely by robust industrial activity and global technology demand, rather than a broad-based recovery in domestic consumption, limiting optimism over demand prospects. However, losses were partly cushioned by signs of stronger export demand, with cargo surveyors estimating palm oil shipments rose 33.5%–37.7% in the first 10 days of October from the same period in September. Expectations of sustained festive buying from top importer India also provided support.

Malaysian palm oil futures stayed firm above MYR 4,700 per tonne, extending their upside momentum as strength in China’s Dalian edible oils and higher crude prices boosted palm’s competitiveness in biodiesel. Export signals were also upbeat, with cargo surveyors estimating October 1–10 exports jumped 33.5%–37.7% from the same period in September, while festive buying from top buyer India and firmer trading activity in China during September added support. Yet sentiment was checked by bearish monthly data from the Malaysian Palm Oil Board. September inventories surged 24.5% mom to a record 3.51million tonnes, the sixth monthly rise in a row. Output climbed 16.5% to 2.12million tonnes, the highest since August 2015, while exports fell 12.1% to 1.12 million tonnes, marking a second month of decline. Record-high stocks, stronger output, and weaker shipments underscored supply pressure, hinting that despite firmer near-term demand, further price gains may be capped by fundamentals.