Palm oil prices rise 3.5% amid stronger soybean oil market and growing stocks

Malaysian palm oil futures surged on November 11, snapping a six-session losing streak. At the close of trading on Bursa Malaysia Derivatives, the January contract gained 151 ringgit, or 3.55%, to 4,407 ringgit ($1,082.27) per ton. The market was supported by stronger soybean oil prices and data showing a smaller-than-expected increase in Malaysian palm oil inventories.

According to the Malaysian Palm Oil Board (MPOB), the country’s palm oil stocks reached a new all-time high in October, surpassing the record level recorded in September. The main reason was persistently strong production, which outpaced the recovery in exports. However, actual inventories came in below market expectations, with traders having forecast a rise to 3.75 mln tons. This became one of the key drivers of the price recovery following the prolonged decline.

Additional support for the Malaysian market came from higher prices for competing edible oils. On China’s Dalian Commodity Exchange, the most-active soybean oil contract rose 1.15%, while palm oil futures gained 2.57%. Meanwhile, soybean oil prices on the Chicago Board of Trade (CBOT) increased by 1.08%. As palm oil and soybean oil compete in the global edible oils market, stronger prices for one typically support the value of the other.

Despite the rebound in futures, export performance remains a limiting factor for the market. According to estimates by independent cargo surveyors, Malaysian exports of palm oil and related products declined by 1.9–2.3% during November 1–10 compared with the same period in October. Meanwhile, the Malaysian ringgit weakened by 0.39% against the US dollar, making palm oil slightly cheaper for overseas buyers and providing additional support to prices.

The market also benefited from an approximately 1% recovery in crude oil prices after they fell to two-month lows. Higher crude oil prices improve the competitiveness of palm oil as a feedstock for biodiesel production. Meanwhile, further price movements will depend on the pace of Malaysian exports, inventory levels and fluctuations in soybean oil futures on international exchanges.

Tags: Malaysia, palm oil