Malaysian Palm Oil's Rangebound Struggle: Can the MPOB Report Break the Stalemate?

The Malaysian palm oil market has been locked in a tight trading range for weeks, oscillating between 3,814 and 3,925 ringgit per metric ton. With the upcoming Malaysian Palm Oil Board (MPOB) report due in early June, traders are bracing for a catalyst to break this stagnation. Technical patterns suggest a decisive move is imminent, but fundamental factors—from biodiesel demand to crude oil dynamics—could tip the scales.

Technical Analysis: Rangebound Tensions
Palm oil futures have traced a narrow corridor since mid-May, with resistance at 3,925 ringgit and support at 3,814 ringgit. This consolidation reflects market indecision ahead of critical data releases and external macroeconomic shifts. A close below 3,814 would signal a bearish tilt toward 3,700, while a breach of 3,925 could target 4,050.
Ask Aime: What's next for the Malaysian palm oil market after the MPOB report?
The MPOB Report: The Key Catalyst
The June MPOB report, expected by June 10, will reveal May's inventory data. Analysts anticipate stocks near 1.99 million tons—the highest in eight months—due to rising production and moderating exports. However, two critical factors could surprise markets:
- Export Strength: May's exports surged 6.3% month-on-month, per preliminary data, driven by India's import duty cuts. If exports exceeded 1.1 million tons (as projected), it could ease supply pressures.
- Crush Numbers: Palm oil used for biodiesel production in Malaysia and Indonesia has surged, with Indonesia's B40 mandate (40% palm oil in diesel) now fully implemented. Strong crush figures could tighten global supplies.
A stockpile increase above 2.0 million tons would likely trigger a sell-off, while a smaller-than-expected build could lift prices. Historically, however, buying Malaysian palm oil futures on MPOB report days and holding for five trading days has underperformed.
Fundamental Catalysts: Biodiesel, Crude, and Trade Tensions
- Biodiesel Demand: Indonesia's B40 and planned B50 (2026) mandates are structural tailwinds. For every 1% increase in biodiesel blending, palm oil demand rises by ~500,000 tons annually.
- Crude Oil Prices: Crude's movements directly influence palm oil's attractiveness as a biodiesel feedstock. A sustained crude price above $80/bbl could boost palm demand, while a drop below $70/bbl might weaken it.
- US-China Trade Dynamics: China's palm oil imports remain sluggish due to trade tariffs, but any easing of tensions could reignite demand.
Currency and Macro Risks
The ringgit's strength relative to the U.S. dollar also matters. A weaker ringgit makes Malaysian exports cheaper, potentially boosting demand. However, if the USD/MYR pair falls below 4.55, it could pressure palm oil prices by reducing profit margins for exporters.
Investment Strategy: Positioning Ahead of the Report
- Bullish Scenario (Stocks Below 2.0 million tons): Buy palm oil futures with a target of 4,050 ringgit. Pair this with a long position in biodiesel-related equities (e.g., KLSE-listed palm processors).
- Bearish Scenario (Stocks Above 2.1 million tons): Short futures below 3,814 ringgit, with a stop-loss above 3,925. Consider hedging with inverse ETFs or crude oil shorts if crude prices dip.
- Neutral Trade: Use options to capitalize on volatility. A straddle (buying both call and put options) around the June 10 report could profit regardless of the direction.
Conclusion: A Crossroads for Palm Oil
The MPOB report is the linchpin for breaking the range. While fundamentals favor a bullish bias due to biodiesel demand and supply constraints, historical backtests reveal that report-driven strategies have underperformed—delivering only 46.64% returns against a benchmark's 107.69%. Traders should prioritize agility, using technical levels and macroeconomic indicators to time entries, while remaining mindful of the strategy's elevated risk profile. For long-term investors, palm oil's role in global biodiesel transitions remains compelling, even as near-term uncertainty persists.
Stay vigilant—June's data could redefine the market's trajectory for months to come.
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