Palm Oil Prices Straddle Crosscurrents: Dalian Strength vs. Crude and Soy Oil Weakness

The palm oil market in June 2025 is a study in contradictions. While Malaysian palm oil futures have held within a narrow range of RM3,900–RM4,200, traders are grappling with conflicting signals from Dalian soyoil, crude oil prices, and currency fluctuations. This interplay of forces creates both risks and opportunities for investors, requiring a nuanced understanding of global commodity dynamics.

Dalian's Influence: A Bearish Catalyst

Dalian palm oil futures have emerged as a key pressure point for Malaysian prices. On June 25, Dalian's most active palm oil contract rose 1.53%—a modest gain driven by India's recent import duty cuts on edible oils. However, the larger story lies in Dalian soyoil's weakness. By mid-June, Dalian soyoil prices had dipped below RM5,000/ton, a critical bearish threshold that spooked palm oil traders. This divergence from rising Chicago soyoil prices highlights a demand imbalance: Asian buyers are favoring cheaper alternatives like soy oil, while U.S. biodiesel mandates prop up CBOT prices.

The data underscores this tension:
- Divergent Trends: Dalian soyoil fell 0.75% on June 26, while CBOT soyoil rose 0.59%.
- Historical Context: Palm oil prices have dropped 11.99% since early 2025, with forecasts predicting further declines to RM3,797/ton by Q3.

Crude Oil: The Biodiesel Bellwether

Crude oil's 4% monthly decline in June has weakened biodiesel economics, a key demand driver for palm oil. When Brent crude dips below $75/barrel, biodiesel production becomes less profitable, reducing palm oil's appeal as a feedstock. On June 25, a 4% drop in crude prices triggered a 2.04% selloff in palm oil futures.

However, geopolitical risks—such as Iran's stalled nuclear deal and OPEC+ supply cuts—could reverse this trend. If crude breaches $75/barrel, biodiesel demand could surge, lifting palm oil prices toward RM4,200.

Chicago Soy Oil: A Mixed Signal

CBOT soyoil's performance is a double-edged sword for palm oil. On June 26, a 0.59% rise in CBOT soyoil prices offered modest support to palm oil, reflecting U.S. biodiesel demand and weather risks in soy-producing regions. Yet, broader declines in the soy complex—driven by favorable U.S. crop conditions—have kept pressure on prices.

The competitive dynamics are clear: when CBOT soyoil rises, palm oil gains indirectly as a substitute. But Dalian's weakness complicates this relationship, creating a tug-of-war between Asian and U.S. markets.

Currency and Trade: The Hidden Variables

Currency movements add another layer of volatility. The ringgit's 0.59% appreciation against the dollar in late June made Malaysian palm oil more expensive for dollar-paying buyers, contributing to the June 26 dip to RM3,987. Conversely, a weaker ringgit (e.g., if USD/MYR falls below 4.50) could boost export competitiveness, especially for India and Europe.

Export data further complicates the picture:
- Malaysian shipments rose 4.3%–4.7% month-on-month in June, fueled by India's duty cuts.
- Production fell 4.56% year-on-year, supporting prices but not enough to offset global supply gluts.

Investment Strategy: Navigating the Crosscurrents

Traders must balance these forces to position themselves for the next move:

Bullish Scenario

• Triggers: Crude above $75/barrel or sustained CBOT soyoil gains.
• Strategy: Buy palm oil futures near RM3,950, targeting RM4,100–RM4,200.
• Rationale: A rebound in biodiesel demand or a U.S. soy supply shock could ignite a rally.

Bearish Scenario

• Triggers: Dalian soyoil below RM5,000/ton or USD/MYR below 4.50.
• Strategy: Short futures at RM4,100, aiming for RM3,900.
• Rationale: Weak Asian demand and a stronger ringgit could exacerbate oversupply fears.

Key Risks to Monitor

1. Indonesian Policies: Jakarta's export taxes or biodiesel mandates could disrupt global supply.
2. Weather: Dry spells in Malaysia/Indonesia or U.S. soy crop issues could skew production.
3. Trade Regulations: EU sustainability rules or U.S. tariffs might curtail demand.

Conclusion: A Delicate Balance

Palm oil's June 2025 price range reflects a market suspended between hope and fear. While export growth and production cuts provide support, Dalian's strength, crude's weakness, and currency headwinds keep prices capped. Investors must remain agile, using technical levels (RM3,900–RM4,200) and macroeconomic indicators to navigate this volatility. For now, the palm oil story remains one of cautious optimism—until a decisive catalyst tips the scales.