Palm Oil Futures: A Golden Crossroad for Bulls

The Malaysian palm oil market stands at a pivotal juncture, where technical momentum aligns with fundamental tailwinds to create a compelling short-term opportunity. With rival oils rallying, biodiesel policies boosting demand, and key support levels holding firm, the stage is set for a strategic long position. Let's dissect the catalysts and risks.

Fundamental Drivers: Export Resilience & Biodiesel Backing

Malaysia's palm oil exports surged to 1.10 million tonnes in April 2025, a 9.6% monthly gain, driven by robust demand from India and China. India's imports hit 423,000 tonnes in March, up 14% month-on-month, as palm oil's $50/ton discount to soybean oil fuels competitiveness. Meanwhile, Indonesia's B40 biodiesel mandate—diverting 2 million tonnes of palm oil to fuel—has constrained export surpluses, supporting global prices.

Crude oil trends further amplify the bullish case. Palm oil's use in biodiesel is directly tied to crude prices; as Brent crude edges toward $80/barrel, producers are incentivized to blend more palm oil. The narrowing price premium of soybean oil over palm oil (now just $20/ton) is a critical technical shift, making palm the cheaper feedstock for refiners.

Technical Analysis: The 3,866–3,969 Pivot Zone

The futures contract is currently testing critical support at RM3,866/ton, with resistance at RM3,969/ton. A break above RM3,969 could trigger a rally toward RM4,200, while a drop below RM3,866 risks a slide to RM3,700.

Key signals for bulls:
- Volume spikes on recent rallies above RM3,866 indicate institutional buying.
- RSI (14) has stabilized above 50, signaling momentum shifts.
- Export data resilience (May exports +6.6% to +14.2%) has underpinned the rebound from RM3,961 lows.

Risks: Oversupply & Ringgit Volatility

The inventory overhang remains a concern. Malaysian CPO stocks hit 1.05 million tonnes in April, a 34.8% monthly jump, pressuring prices. A further spike could test stops below RM3,866.

Meanwhile, the Malaysian ringgit's strength against the USD (+2% YTD) erodes export competitiveness. A stronger ringgit could force prices lower to maintain global demand.

Investment Thesis: Go Long with Disciplined Stops

Buy on dips to RM3,866, target RM3,969 first, then RM4,200.

• Bullish catalysts:
• India's restocking cycle: Imports could hit 600,000 tonnes by June, per analysts.
• Biodiesel mandates: Indonesia's B40 and China's biofuel subsidies lock in domestic demand.

• Rival oil dynamics: Soybean oil's supply bottlenecks (U.S. Midwest rail strikes) may widen palm's discount advantage.

• Stop-loss discipline: Exit below RM3,866 to limit losses if inventory fears dominate.

Final Call: The Palm Oil Rally is Just Beginning

The convergence of strong export data, biodiesel tailwinds, and technical support at RM3,866 creates a high-reward, low-risk entry point. While risks like El Niño (2027) loom, they are long-term. For now, the market is primed for a short-term rebound.

Act now—before the bulls break through RM3,969.

Disclaimer: Past performance ≠ future results. Monitor crude oil trends and export data closely.