Palm Oil Futures: Navigating the Crosscurrents of Soybean Oil Divergence and Global Demand Shifts

The global edible oil market has entered a period of intense volatility, driven by divergent trends in Dalian and CBOT soybean oil prices and their ripple effects on Malaysian palm oil futures. For investors, this divergence represents both a challenge and an opportunity—a chance to position strategically in a market where regional demand shifts, crude oil dynamics, and technical inflection points are converging.

The Dalian-CBOT Divide: A Tale of Two Markets

The first half of 2025 has seen a stark split between Asian and U.S. soybean oil markets. Dalian soyoil prices have faltered, dropping 0.75% on June 26 alone, while CBOT soyoil has climbed 0.59% on the same day. This split reflects divergent regional demand patterns: China's domestic consumption remains sluggish, while U.S. demand, bolstered by biofuel mandates and export strength, continues to outpace expectations.

For Malaysian palm oil, this duality creates a unique dynamic. Weaker Dalian soyoil prices have historically acted as a disincentive for palm oil in Asia, where cost-sensitive buyers often substitute palm oil for soybean oil. However, the recent CBOT strength has offset some of this downward pressure, as U.S. biodiesel demand—a key driver of global palm oil prices—has surged. This "spillover effect" has kept palm oil futures in a narrow trading range, hovering near RM4,063 per tonne as of July 17.

The Role of Crude Oil and Currency: Hidden Levers in the Palm Oil Equation

Palm oil's fate is inextricably linked to crude oil prices. In June 2025, a 4% drop in crude prices depressed palm oil futures by 2.04%, as the economic viability of biodiesel waned. However, a rebound in crude prices above $75/bbl could reverse this trend, acting as a bullish catalyst. Investors should monitor the interplay between crude and palm oil closely, as biofuel mandates in Indonesia and the U.S. amplify this sensitivity.

Equally critical is the Malaysian ringgit. A stronger MYR (as seen in late June) has increased costs for foreign buyers, dampening demand. Conversely, a weaker ringgit could make Malaysian palm oil more competitive globally. With the USD/MYR pair currently at 4.50, even minor currency fluctuations could tip the market in either direction.

Export Data and Technical Breakouts: The August 2025 Inflection Point

The coming weeks will be pivotal for palm oil investors. Malaysia's export data for July 1–20, expected after July 20, will clarify whether recent front-loading shipments (up 31% year-on-year) can sustain price momentum. This data will also shed light on inventory levels, which remain a key concern. June's exports fell 10.5% month-on-month to 1.26 million tonnes, but July's surge—driven by India's import duty cuts and front-loading ahead of U.S. tariff hikes—suggests demand resilience.

Technically, the market is bracing for a breakout. The 200-day moving average at RM4,050 acts as a critical pivot point. A sustained close below this level could trigger a slide toward RM3,965, while a breakout above RM4,254–4,292 could signal a shift to bullish territory.

Strategic Positioning for Investors

For those seeking to capitalize on this volatility, a dual approach is warranted:
1. Short-Term Plays: Target the RM4,254–4,292 resistance zone for sell entries, with stop-losses above RM4,300 and profit targets at RM4,178. This level aligns with the 200-day moving average and offers a high-probability entry point for long-term accumulation.
2. Long-Term Bets: Buy dips near RM4,178, with stops below RM4,100 and targets at RM4,400–4,500 by early 2026. Structural tailwinds, including Indonesia's B40 biodiesel mandate and El Niño-driven supply constraints, could push prices toward these levels.

Investors should also monitor the U.S. dollar index and crude oil prices, as both will influence the cost competitiveness of palm oil in global markets. A strengthening dollar or a crude price drop below $80/bbl could exacerbate short-term headwinds, while a rebound in crude and a weaker ringgit would act as tailwinds.

Conclusion: A Market at the Crossroads

The Malaysian palm oil market is in a delicate balancing act. While short-term volatility from soybean oil competition and crude oil fluctuations persists, long-term fundamentals—tightening global supplies, biofuel mandates, and strategic export advantages—paint a bullish picture. For investors with a risk appetite, the coming weeks offer a rare opportunity to position ahead of key data releases and technical breakouts. The key will be to remain agile, leveraging both technical precision and macroeconomic insights to navigate this complex, but potentially rewarding, commodity landscape.