Malaysian palm oil prices fall amid weaker crude oil and competition from Indonesia

Malaysian palm oil futures closed lower on Monday, November 2, pressured by reduced Indonesian export charges, falling global crude oil prices and concerns over rising inventories. The January contract on Bursa Malaysia Derivatives declined by 31 ringgit, or 0.66%, to 4,650 ringgit/t ($1,144.19/t).

The main pressure on the Malaysian market came from Indonesia’s decision to lower its crude palm oil reference export price and associated export charges for November. This improved the competitiveness of Indonesian products in global markets and prompted Malaysian suppliers to adjust their prices to maintain their positions among major importers.

Additional pressure came from a nearly 4% decline in crude oil prices amid negotiations over a possible end to the US-Israeli war against Iran. Lower energy prices reduce the attractiveness of palm oil as a feedstock for biodiesel production, weakening price support from the biofuel sector.

Meanwhile, market participants continued to assess the prospect of rising palm oil inventories in Malaysia. Although independent cargo surveyors estimated that Malaysian palm oil exports increased by 45.4–73.5% in October compared with September, analysts pointed to supply continuing to outweigh demand. The lack of confirmation regarding a potential Malaysian palm oil export tax waiver added further uncertainty.

Rival vegetable oil markets showed mixed performance. The most-active soybean oil contract on China’s Dalian exchange rose by 0.54%, while palm oil futures gained 0.92%. Meanwhile, soybean oil futures in Chicago declined by 0.44%. A 0.35% weakening of the Malaysian ringgit against the US dollar provided some support for the export competitiveness of Malaysian products but was insufficient to offset broader downward pressure on prices.

Tags: Indonesia, Malaysia, palm oil