Palm oil falls more than 1% on Monday as crude oil prices decline

Malaysian palm oil futures fell more than 1% on July 27, retreating from a 15-week high reached in the previous session. The market came under pressure from a sharp decline in crude oil prices and weaker vegetable oil markets in China, although strong demand from Chinese buyers helped limit the decline.

The benchmark October palm oil contract on the Bursa Malaysia Derivatives Exchange settled at 4,673 ringgit ($1,144.5) per ton, down 49 ringgit, or 1.04%, from the previous close. According to analysts at Sunvin Group, the market was also weighed down by lower Chicago soyoil prices, Dalian palm olein futures and Zhengzhou rapeseed oil prices.

Losses were capped by robust Chinese demand, expectations of higher consumption under Indonesia’s B50 biodiesel mandate, concerns over potential El Niño-related production risks and tighter palm oil export availability from Indonesia.

The market also came under pressure from a sharp decline in crude oil prices. Prices fell more than 5% after the United States and Iran paused military strikes over the weekend, raising hopes for a diplomatic solution that could ease tensions and restore shipping through the Strait of Hormuz. Lower crude oil prices reduced the attractiveness of palm oil as a biodiesel feedstock.

Across competing vegetable oil markets, Dalian’s most-active soyoil contract lost 1.42%, while its palm oil contract declined 1.66%. Chicago Board of Trade soyoil futures fell 2.17%. At the same time, exports of Malaysian palm oil products during July 1–25 increased by 8.1–15.9% compared with the same period in June, according to cargo surveyors, providing continued support to the market.

Tags: prices, palm oil