Palm oil market pressure eased, inventory reconstruction expectations dominated short-term sentiment

On Monday (October 13), the main palm oil contract on the Malaysian Derivatives Exchange closed down 1.06% at 4496 ringgit/ton, continuing the previous day's weakness. Intraday prices were technically under pressure near 4569 points on the Bollinger Band upper rail, and the MACD indicator contracted in red, indicating that short-term momentum has weakened. The market showed a cautious attitude amid the long and short intertwining of supply pressure and export data.

Fundamentals: Inventory reconstruction and the production cycle game

The current core contradiction in the market focuses on seasonal production increases and changes in inventory expectations. Although Malaysian palm oil exports rose by 9.9% -19.4% month-on-month on October 1-10, the bullish price failed to offset the market's concerns about inventory accumulation. "The lower crude palm oil prices are mainly influenced by market risk aversion and expectations of inventory increases due to increased production in the coming weeks," said David Ng, a proprietary trader at Iceberg X, a trading house in Kuala Lumpur. His view directly points to the driving logic of the recent price correction.

The production side has entered the traditional high-yield cycle, and the Malaysian government's forecast range for the average price of crude palm oil in 2026 has been moved down to 3900-4100 ringgit/ton, reflecting the expected easing of global oil supply. This official forecast further strengthens the medium and long-term supply pressure, but it should be noted that there is still a discount to the current contract price, indicating that the market has partially priced the expectation of future production increases.

Connected markets: external support and competition landscape differentiation

Although the price of soybean oil on the Chicago Board of Trade rose slightly by 0.3%, the soybean oil and palm oil contracts on the Dalian Commodity Exchange fell by 0.67% and 1.31% respectively, indicating that the short-term sentiment in the Chinese vegetable oil market is bearish. It is worth noting that the international crude oil price rebounded from a five-month low. If this trend continues, it may provide marginal support for palm oil through the biodiesel demand path. In addition, the Ringgit exchange rate depreciated slightly by 0.07% against the US dollar. Although it improved the competitiveness of palm oil exports to a certain extent, the current exchange rate fluctuation is not enough to reverse the dominant logic of the market.

Institutional perspective: short-term caution and long-term concerns

Market participants are clearly divided on the market outlook. Some analysts believe that the month-on-month improvement in export data may form a bottom support for prices, but expectations of inventory reconstruction are still the core factor suppressing prices. David Ng's emphasis on "declining risk appetite" and "inventory accumulation" resonate, prompting funds to choose profit-taking after consecutive rebounds. Technically, 4318 points on the Bollinger Band mid-rail and 4569 points on the upper rail form a near-term fluctuation range. If the RM4,500 mark cannot be stabilized in the next few trading days, it may further explore the support.

Outlook: Validation Signals Focusing on Supply and Demand Data

In the coming week, the market will closely track the monthly inventory data and high-frequency export statistics of the Malaysian Palm Oil Board (MPOB). If actual inventory growth is lower than expected or exports remain strong, the current pessimism may be corrected. However, in the long run, global oilseed production and replacement oil supply growth remain the sword of Damocles hanging above the market. Investors need to be wary of the risk of short-term rebound and long-term fundamentals diverging, and maintain position flexibility until the trend is clear.