Malaysian Palm Oil Futures Dip on Record Inventory Expectations

Malaysian palm oil futures dropped on October 6, driven by expectations of record-high inventories and weaker crude oil prices. The December contract on Bursa Malaysia Derivatives fell 18 ringgit, or 0.39%, to close at 4,560 ringgit per ton, roughly $1,117 per ton.

The market anticipates Malaysia’s palm oil stocks to hit an all-time high in September, surpassing the previous record set in December 2018. The surge in inventories is attributed to record production outpacing sluggish export demand.

Additional pressure came from a more than 2% decline in crude oil prices, as rising Middle Eastern exports and the G7’s release of emergency diesel and crude oil reserves eased supply concerns. Lower crude prices also reduced the appeal of palm oil as a biodiesel feedstock.

Soyoil prices on the CBOT also declined by 0.58%, while the Malaysian ringgit strengthened by 0.07% against the US dollar, making Malaysian palm oil slightly more expensive for international buyers.

On a positive note, Indian demand for palm oil strengthened. India’s sunflower oil imports fell to their lowest level in over four years due to supply disruptions from Ukraine, prompting refiners to increase palm oil purchases to a seven-month high.