On March 18, 2024, the Malaysian palm oil futures market experienced a notable rise, drawing widespread market attention. This increase seemed to signal an improving market trend, but in reality, it hid multiple unknown risks. Although strong prices for other competing vegetable oils helped push palm oil prices higher, poor export performance and expected production increases in some regions remained concerns for the market.
At the Malaysia Derivatives Exchange, the benchmark palm oil contract for June delivery, FCPOc3, saw a rise of 0.47%, closing at 4240 ringgit (approximately 899.07 USD). Traders attributed this price increase to the rise in prices of other oils in the international market, especially early gains in Chicago soy oil and Dalian palm oil contracts. However, higher production data released by the Southern Peninsula Palm Oil Millers' Association (SPPOMA) put pressure on market sentiment.
According to SPPOMA, palm oil production from March 1 to 15 grew by 38.8% compared to the same period last month. Meanwhile, early export data showed that the growth rate of exports did not meet market expectations. Data from the independent inspection company AmSpec Agri Malaysia and the freight measuring agency Intertek Testing Services revealed that exports of Malaysian palm oil products in the first half of March only saw a slight increase from the first half of February.
In the international market, price fluctuations of Dalian palm oil and soy oil have impacted the Malaysian palm oil futures market. The Dalian palm oil contract relinquished some of its early gains during the session, while Chicago Board of Trade soy oil prices also fell after reaching a near-three-month high.
Notably, palm oil prices are influenced not only by the dynamics of other vegetable oil markets but also by changes in crude oil prices. Generally, an increase in crude oil prices leads to higher production costs for palm oil, which in turn pushes up palm oil prices; conversely, a decline in crude oil prices can lead to a decrease in palm oil prices. Given that palm oil serves as an alternative energy source, fluctuations in crude oil prices directly affect palm oil demand and prices.
Looking ahead, market analysts predict that the Malaysian palm oil futures price may test the resistance level of 4326 ringgit per ton. If it successfully breaks through, prices are expected to climb further to an interval between 4378 ringgit and 4410 ringgit. However, investors need to closely monitor dynamics in the international crude oil market as well as the global supply and demand situation for palm oil, in order to more accurately gauge the future direction of palm oil futures. In this uncertain market, thorough research and a cautious investment strategy are key to avoiding potential losses.
