Navigating Malaysian Palm Oil Futures: The Interplay of Edible Oils, Crude, and Currency

Malaysian palm oil futures for September 2025 closed at RM3,987 per metric ton on June 26, 2025, reflecting a delicate balance between global commodity dynamics, currency fluctuations, and export trends. This price sits within the Malaysian Palm Oil Council's (MPOC) projected range of RM3,900–RM4,200 for July, but traders must navigate a volatile landscape where rival edible oils, crude oil prices, and the ringgit's strength all play critical roles. Let's dissect the interplay of these factors and identify near-term trading opportunities.

1. Rival Edible Oils: A Double-Edged Sword

Palm oil competes directly with soybean oil (soyoil) and sunflower oil, and their price movements often dictate palm oil's trajectory.

• Soybean Oil Dynamics:

On June 26, Dalian soyoil fell by 0.75%, while CBOT soyoil rose 0.59%. This divergence highlights regional demand disparities: weakening Asian soyoil prices pressured palm oil downward, while stronger U.S. soyoil prices provided modest support. Traders must monitor both exchanges to gauge global demand shifts.

• Sunflower Oil's Role:
  While less directly correlated, rising sunflower oil prices (due to Black Sea supply risks) can indirectly boost palm oil demand as a substitute. However, this effect is muted compared to soyoil's influence.

Takeaway: A sustained rise in CBOT soyoil (driven by U.S. biodiesel demand or weather risks) could create a "spillover effect," lifting palm oil prices. Conversely, if Dalian soyoil remains weak, palm oil may struggle.

2. Crude Oil: The Biodiesel Link

Palm oil's use in biodiesel production ties its price to crude oil. When crude prices rise, biodiesel becomes more economically viable, boosting palm oil demand.

• June 2025 Trends:

Crude oil fell by ~4% in June, reducing biodiesel's appeal and pressuring palm oil prices. For example, on June 25, crude's decline contributed to a 2.04% drop in palm oil futures.

Takeaway: Traders should watch OPEC+ policy and Middle East geopolitical risks. A rebound in crude prices (e.g., due to supply cuts or sanctions) could create a bullish catalyst for palm oil.

3. Currency Movements: The Ringgit's Role

Malaysia's currency, the ringgit, acts as a double-edged sword:

• Export Competitiveness:
  A weaker ringgit makes Malaysian palm oil cheaper for dollar-paying buyers like India, boosting exports. Conversely, a stronger ringgit (as seen in June) increases costs for foreign buyers, dampening demand.

• June 2025 Context:

The ringgit strengthened by 0.59% against the dollar in late June, contributing to palm oil's June 26 decline.

Takeaway: Short-term traders might bet on ringgit weakness (e.g., via USD/MYR pairs) to capitalize on export-driven price rallies.

4. Export and Production Data: The Ground Reality

• Exports Surge:
  Malaysian palm oil shipments rose 4.3%–4.7% month-on-month in June (via AmSpec/Intertek data), fueled by India's import duty cuts. Strong demand from Europe (due to the Malaysia-European Free Trade Agreement) also provided tailwinds.

• Production Declines:
  Output for June 1–20 fell 4.56% year-on-year, aligning with seasonal patterns and supporting prices.

Takeaway: Export momentum and reduced supply could limit downside risk below RM3,900, making this a potential floor for short-term traders.

Near-Term Trading Strategy

1. Bullish Scenario:
2. Trigger: A rebound in crude oil prices (above $75/bbl) or a sustained rise in CBOT soyoil prices.

3. Play: Buy palm oil futures near RM3,950, targeting RM4,100–RM4,200.

4. Bearish Watch:

5. Trigger: Dalian soyoil prices dip below RM5,000/ton, or a ringgit surge (USD/MYR below 4.50).

6. Play: Short futures at RM4,100, aiming for RM3,900.

7. Hedging:

8. Use options to protect against extreme volatility, given Bursa Malaysia's 15% daily price limits.

Risks to Monitor

• Indonesian Policies: Jakarta's export taxes and biodiesel mandates directly impact global supply.
• Weather: Dry spells or pests in Malaysia/Indonesia could disrupt production.
• Global Trade: U.S. tariffs on palm oil or EU sustainability regulations could curb demand.

Conclusion

Malaysian palm oil futures sit in a tight trading range, with prices hinging on edible oil competition, crude oil trends, and currency movements. For the near term, RM3,900–RM4,200 remains the key battleground. Traders should prioritize flexibility, using technical levels and macroeconomic indicators to time entries. While the path is volatile, staying attuned to these interlinked factors could unlock profitable opportunities in this critical commodity.

Stay vigilant—and trade with discipline.