Palm Oil Futures in Malaysia Under Pressure

Palm oil futures in Malaysia have been trading at low levels this week, with the potential for further declines due to reduced export volumes. This reduction is placing downward pressure on the prices of soybean and sunflower oils.

Export Reductions

From May 1-15, Malaysia's palm oil product exports decreased by 5.2% compared to the same period in April, reaching 600.8 thousand tons according to Intertek Testing Services. Societe Generale de Surveillance (SGS) reported a further reduction to 427 thousand tons.

Futures Market Movements

Despite the overall downward trend, July palm oil futures on Bursa Malaysia rose 2.3% to 3,892 ringgit/t ($831/t) on Friday, showing a 0.7% increase over two weeks. The rise was supported by higher oil prices. On the Dalian exchange, palm oil contracts increased by 0.37%, while soybean oil contracts rose by 0.54%.

Government Policies and Pricing Adjustments

The Malaysian government has maintained the crude palm oil export duty at 8% for June but lowered the base price from 4,273.93 ringgit/t in May to 3,956.06 ringgit/t ($845.13/t) for June. This adjustment is expected to help reduce export prices.

Soybean and Sunflower Oil Market Dynamics

Soybean Oil

July soybean oil futures on the Chicago Stock Exchange saw a 3.7% increase over Thursday and Friday, reaching $995/t (+1.8% for the week, +4.8% over two weeks). However, for the month, prices fell by 0.9% due to reduced US processing in April and accelerated soybean harvesting in Argentina.

Sunflower Oil

According to Trading Economics, the average price of sunflower oil for delivery to customers increased by 0.8% to $856/t during the week (-1.4% for the month). In Ukraine, prices rose by $10/t to $810-820/t for delivery to Black Sea ports, driven by reduced supply. In the EU, delivery prices are stabilizing as rapeseed and soybean oils continue to enter the market.

Oil Market Influences

Brent Oil Futures

July Brent oil futures rose by 1.4% for the week. This increase followed attacks on Russian oil depots and refineries by Ukrainian UAVs, along with expectations of increased demand from China due to plans to buy unfinished real estate from developers to prevent bankruptcies.

Geopolitical Factors

The death of the Iranian president may reduce speculative impacts on oil prices, as the activity of Iranian proxies in the Red Sea is expected to decrease before the election of a new president. Recently, the Houthis damaged a tanker carrying oil from Russia to China in the Red Sea.

Factors Influencing Future Prices

Several factors will determine whether palm oil, soybean oil, and sunflower oil prices will rise, remain stable, or fall:

• Export Volumes: Continued reductions in palm oil exports will likely keep prices low.
• Government Policies: Adjustments in export duties and base prices by the Malaysian government will impact export competitiveness and pricing.
• Global Demand: Changes in global demand for palm oil and related oils will influence market dynamics.
• Weather Conditions: Weather-related disruptions in key production areas could affect supply levels and prices.
• Geopolitical Events: Ongoing geopolitical tensions and their impact on oil supply chains will continue to play a significant role.

Monitoring these factors will be crucial for predicting future price trends in the palm oil, soybean oil, and sunflower oil markets.