Malaysian Palm Oil Market Prices in El Niño Risks Amid High Inventories

The Malaysian palm oil market is pricing in El Niño risks, but July inventories have yet to be fully absorbed. The October contract for crude palm oil on Bursa Malaysia Derivatives (BMD) closed at 4,711 ringgit per tonne, down 13 ringgit from the previous day.

The market is experiencing contango in forward months and backwardation in near months, indicating that prices are being influenced by separate factors. While high July inventories are putting pressure on near-month contracts, concerns over El Niño-related weather disruptions and stronger energy prices are supporting forward-month quotes.

Data from the Malaysian Palm Oil Board (MPOB) shows that Malaysia's palm oil inventories in July rose to a five-month high, with production continuing to outpace export demand. This short-term supply surplus is limiting the upside potential for near-month contracts but does not directly alter the weather-based pricing for forward months.

Palm oil prices are also being influenced by Indian demand, which hit a 10-month high in July due to pre-festival restocking. However, sustainability depends on the pace of August purchases and the price spread between palm oil and soybean oil.