The palm oil market has entered a phase of renewed volatility, following an impressive six-week winning streak on the Malaysian Derivatives Exchange (MDEX). Although prices had closed higher at the end of last week—up 4.8% over the period—sentiment soured sharply as Asian trading began on Monday, taking cues from weaker Dalian commodity futures. This negative mood spilt over, pushing Malaysian contracts into the red despite underlying fundamental support from previous supply constraints.

While recent contracts have shown incremental gains, the market remains highly sensitive to external triggers, ranging from Chinese demand swings to shifting soybean and sunflower oil competitiveness. Persistent uncertainty about the upcoming monsoon season in key Southeast Asian producing regions is another wild card for supply concerns, with production forecasts balancing on a knife-edge. Meanwhile, buyers in major importing countries continue to exhibit restraint, awaiting clearer signals on crop development and price direction. Against this dynamic backdrop, momentum-driven trading and speculative positioning become ever more important drivers. Below, we explore the latest prices, supply and demand fundamentals, and what to watch in the days ahead.

📈 Prices: Latest Palm Oil Futures

Note: Other contracts follow similar trends; most distant maturities show low liquidity.

🌍 Supply & Demand Drivers

• Export Demand: Demand from China and India remains subdued, with buyers cautious amid volatile prices and worries over future supply disruptions.
• Competing Oils: Weakness in soybean and sunflower oil prices (notably on Dalian) is weighing on palm oil's competitiveness, particularly in Asia.
• Production: Malaysian and Indonesian output forecasts see slight upward revisions, but weather risk could cap gains as monsoon rains are set to begin.
• Inventories: Stocks in major producing countries are down year-on-year. However, slow overseas buying tempers the bullish impulse.
• Speculative Activity: Institutional positioning remains highly sensitive to external developments, amplifying day-to-day price movements.

📊 Fundamentals

• Recent Performance: Palm oil futures gained for six consecutive weeks, supported by tight stocks and supply anxiety. Last week ended higher despite soft demand.
• Market Comparison: Prices have outperformed most competing edible oils recently, but are now vulnerable to profit-taking and a shift in speculative flows.
• Exchange Rate Influence: The weakening Malaysian ringgit has bolstered export competitiveness, but movements are being outweighed by external drivers.

🌦️ Weather Outlook

• Malaysia and Indonesia: The onset of the monsoon season is forecast to bring heavier rain through the next two weeks in both Malaysia and Indonesia's principal producing regions, potentially impeding harvest and logistics short-term, but may favour future yield prospects if rainfall is moderate.
• Price Impact: Excessive rain could disrupt deliveries and support prices in the very short term. Conversely, balanced precipitation may relieve crop stress later in the year.

🌐 Global Production & Stocks (Comparison)

Data: USDA, Market Consensus

📆 Trading Outlook & Strategies

• Short-term volatility likely as Asian exchanges set the tone. Watch open interest in September–November contracts for direction.
• Weather developments in Southeast Asia will be key—closely monitor rainfall forecasts through early July.
• Importers may use any dips for strategic coverage, but risk appetite remains limited until price momentum resettles.
• Bulls need evidence of supply disruption or sharply higher Chinese demand to trigger further gains.
• Bears will look for a continuation of weak demand data and robust production into Q3.
• Day traders: Expect increased price swings—look for quick reversals linked to Dalian and energy market signals.

🔮 3-Day Regional Price Forecast (MDEX MYR/t)

Expect ongoing two-way moves as weather and Asian demand signals dominate near-term trade.