Palm oil prices experienced a marginal increase this week, climbing to MYR 4,383/mt from MYR 4,371/mt recorded in the same period last year. The price movement reflects the complex dynamics currently shaping the global vegetable oil market.

Crude oil provides support

Rising Brent crude oil prices provided underlying support to palm oil values, alongside strength in rival vegetable oils. However, the increase remained modest due to several pressuring factors that continue to weigh on the market.

Current September price levels still trade below October contracts, indicating near-term supply pressure in the market.

Malaysian stock expectations dampen gains

Market analysts Kenanga and CIMB project a 6% increase in Malaysian palm oil stocks to 2.33 million metric tons in September. This expectation stems from anticipated export declines as elevated palm oil prices reduce demand competitiveness.

Early export data supports these projections, with one surveying company reporting September 1-15 export growth at just 2.5% for Malaysia – a notably weak performance that suggests buyer resistance to current price levels.

Despite the stock build, 2.3 million metric tons does not represent a critical level for September. More encouragingly for demand, palm oil has finally achieved a $50/mt discount to soy oil on a CIF India basis, making it somewhat attractive to buyers, though further price gains may remain limited.

Indonesian biodiesel policy creates uncertainty

A significant factor weighing on long-term demand projections comes from Indonesia, where the government has signaled a potential shift to B45 biodiesel mandate in 2026 instead of the previously planned B50.

This policy adjustment would require an additional 1.5 million metric tons of palm oil instead of 3 million metric tons, representing a substantial reduction in domestic demand expectations.

India inventory situation mixed

India, the world’s largest palm oil buyer, held total vegetable oil stocks at 966,000 mt in August, down from 1.041 million metric tons in August 2024. However, palm oil-specific stocks increased to 535,000 mt compared to 412,000 mt in the previous year, indicating adequate supply levels in the key import market.

Market outlook remains cautiously bullish

Looking ahead, palm oil prices may find additional support deeper into Q4 due to the approaching rainy season and festive demand ahead of Muslim holidays. The discount to soy oil provides some breathing room for competitive positioning.

However, the upcoming US soy harvest and continued weak Chinese buying could pressure soy oil prices lower, potentially weighing on palm oil values through substitution effects.

The longer-term outlook will largely depend on Indonesia’s final decision regarding biodiesel mandates for 2026, which could remove significant volumes from the global palm oil market and support prices into the next year.

For procurement managers, the current pricing environment suggests opportunities for strategic purchasing, particularly given the improved competitiveness against soy oil. However, timing remains crucial as seasonal factors and policy decisions continue to create volatility in the market.


This article is part of our weekly oils and fats market analysis. View the full analysis here: https://app.vespertool.com/market-analysis/2277