Palm oil falls on stronger ringgit, weak crude and soyoil
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Malaysian palm oil futures fell for a fifth consecutive session on Monday, as a firmer ringgit, declining crude oil, and weakness in Chicago soyoil continued to weigh on sentiment.
The benchmark July delivery contract (FCPO1!) on the Bursa Malaysia Derivatives Exchange declined 93 ringgit, or 2.4%, to 3,788 ringgit ($902.33) per metric ton by the midday break. The sustained strength of the ringgit is dampening Malaysia’s export competitiveness by making palm oil more expensive for buyers using foreign currencies. The USDMYR fell 1.01%, with the ringgit appreciating 1.41% on the day. According to Darren Lim, commodities strategist at Phillip Nova, the exchange rate dynamics are creating immediate downside pressure on palm oil prices.
At the same time, market fundamentals are turning more bearish. Traders are anticipating a seasonal uptick in both production and inventories in the coming months, a trend supported by early estimates pointing to a second consecutive monthly build in Malaysia’s palm oil stocks for April. The second half of the year traditionally marks peak output for the industry, amplifying concerns about oversupply.
Global energy markets are compounding the weakness. Crude oil futures dropped over $2 a barrel in early Asian trade, after OPEC+ signaled intentions to ramp up production. This has pressured the entire vegetable oils complex, particularly palm oil, which competes with fossil fuels as a biodiesel feedstock. Lower crude prices erode the cost advantage and demand outlook for bio-based alternatives. Additionally, soyoil prices on the Chicago Board of Trade (ZL1!) fell 2.14%, adding further bearish pressure through cross-market contagion. Palm oil often moves in tandem with rival edible oils as they vie for market share in the global vegetable oils trade.
Still, from a technical standpoint, there may be signs of stabilization. According to Reuters analyst Wang Tao, palm oil could find a near-term bottom around 3,828 ringgit, with potential to rebound toward 3,951 ringgit if support holds. However, in the absence of supportive macro drivers or a reversal in crude dynamics, the path of least resistance remains to the downside for now.
Markets will be closely watching inventory data and currency fluctuations as trading resumes in China following the Labour Day holidays. Broader sentiment will hinge on whether the anticipated seasonal supply pressures materialize in line with expectations.
The benchmark July delivery contract (FCPO1!) on the Bursa Malaysia Derivatives Exchange declined 93 ringgit, or 2.4%, to 3,788 ringgit ($902.33) per metric ton by the midday break. The sustained strength of the ringgit is dampening Malaysia’s export competitiveness by making palm oil more expensive for buyers using foreign currencies. The USDMYR fell 1.01%, with the ringgit appreciating 1.41% on the day. According to Darren Lim, commodities strategist at Phillip Nova, the exchange rate dynamics are creating immediate downside pressure on palm oil prices.
At the same time, market fundamentals are turning more bearish. Traders are anticipating a seasonal uptick in both production and inventories in the coming months, a trend supported by early estimates pointing to a second consecutive monthly build in Malaysia’s palm oil stocks for April. The second half of the year traditionally marks peak output for the industry, amplifying concerns about oversupply.
Global energy markets are compounding the weakness. Crude oil futures dropped over $2 a barrel in early Asian trade, after OPEC+ signaled intentions to ramp up production. This has pressured the entire vegetable oils complex, particularly palm oil, which competes with fossil fuels as a biodiesel feedstock. Lower crude prices erode the cost advantage and demand outlook for bio-based alternatives. Additionally, soyoil prices on the Chicago Board of Trade (ZL1!) fell 2.14%, adding further bearish pressure through cross-market contagion. Palm oil often moves in tandem with rival edible oils as they vie for market share in the global vegetable oils trade.
Still, from a technical standpoint, there may be signs of stabilization. According to Reuters analyst Wang Tao, palm oil could find a near-term bottom around 3,828 ringgit, with potential to rebound toward 3,951 ringgit if support holds. However, in the absence of supportive macro drivers or a reversal in crude dynamics, the path of least resistance remains to the downside for now.
Markets will be closely watching inventory data and currency fluctuations as trading resumes in China following the Labour Day holidays. Broader sentiment will hinge on whether the anticipated seasonal supply pressures materialize in line with expectations.