Malaysian Palm Oil Futures: A Volatile Dance with Crude, Currency, and Conflict

The price of Malaysian Palm Oil Futures (FCPO) has become a barometer of global commodity market tensions, geopolitical volatility, and the shifting calculus of energy and agricultural demand. As of June 19, 2025, the benchmark September contract traded at RM4,096 per ton, hovering near its lowest level in seven months. This precarious position underscores the market's sensitivity to a constellation of macroeconomic forces—from crude oil prices to currency swings—and the need for traders to navigate a range-bound strategy with discipline.

The Crude Oil Connection: Inverse Dynamics and Geopolitical Triggers

Palm oil's price is inextricably tied to crude oil through the POGO (Palm Oil vs. Gasoil) spread, which determines the economic viability of biodiesel production. When crude prices rise, biodiesel becomes competitive, narrowing the POGO spread and lifting palm oil demand. Conversely, falling crude prices widen the spread, weakening palm oil's appeal.

In June 2025, Brent crude prices dipped to $75/barrel, widening the POGO spread to $165/ton and pushing palm oil below RM4,000/ton. However, a 7% spike in crude prices after missile attacks between Israel and Iran on June 16 briefly lifted palm oil to RM4,103/ton, underscoring the inverse relationship. Analysts estimate that a 10% crude oil price increase to $85/barrel could narrow the POGO spread to $120/ton, potentially pushing palm oil toward RM4,200/ton by year-end.

The Soybean Oil Conundrum: Competitive Pricing and Demand Shifts

Palm oil's discount to soyoil has become a critical factor for traders. In Q2 2025, palm oil regained a $50/ton discount to soyoil, its largest gap in 18 months, driven by India's 10% import duty cut and a weaker ringgit. This pricing edge fueled a 10% surge in Indian palm oil imports, which hit 592,888 tons in May—84% higher than April.

However, traders must monitor the $30/ton threshold: Below this, soyoil becomes a more attractive alternative, risking a demand shift. With U.S. soybean inventories projected to drop to 200 million bushels by July, soyoil volatility could intensify.

Currency Crosscurrents: The Ringgit's Role in Export Dynamics

A weaker ringgit boosts Malaysian palm oil's competitiveness abroad. The Malaysian ringgit's 0.68% depreciation against the USD in June made palm oil cheaper for global buyers, supporting exports. But further weakness could exacerbate oversupply concerns if crude prices remain subdued.

Geopolitical and Policy Risks: B40 Mandates to EU Regulations

• Indonesia's B40 biodiesel mandate has diverted 2 million tons of palm oil to domestic use, reducing global supply.
• The EU's December 2025 deforestation regulation could disrupt trade flows, increasing compliance costs and reducing EU imports.
• India's reliance on cheap palm oil imports risks a shift to Ukrainian sunflower oil if global prices stabilize.

Technical Analysis: The Range-Bound Reality

Palm oil futures are trapped between key support/resistance levels:
- Resistance: RM4,113/ton (June 2025 highs). A sustained breach could signal a rally toward RM4,200/ton.
- Support: RM4,072/ton (July 2024 lows). A breakdown below this risks a collapse toward RM3,500/ton, especially if crude dips below $78/barrel.

The current price (RM4,096) places traders in a precarious middle ground. A stop-loss near RM3,998—below the RM4,072 support—is critical to protect against a sharp downside.

Investment Strategy: Range-Bound Trading with Caution

1. Buy the Dips at RM4,072: Enter long positions near the support level, targeting RM4,113 resistance.
2. Avoid Over-Reliance on External Factors: While crude oil and soyoil dynamics matter, tangible demand growth—like sustained Indian imports or EU policy clarity—is essential.
3. Monitor Technical Levels and Stop-Losses: A close below RM4,072 invalidates the bullish case, while a breach of RM4,113 opens the door to higher targets.

Final Take

Malaysian palm oil futures are a microcosm of global commodity markets: volatile, interconnected, and prone to sudden shifts. Traders must balance macroeconomic signals with disciplined technical analysis. While the RM4,072–RM4,113 range offers opportunities, overexposure to external factors—without concrete demand catalysts—could lead to costly missteps. In this high-wire act, patience and precision are the ultimate commodities.