Palm Oil
Current market conditions as of 29/05/2025:
Palm oil sentiment turned bearish over the quarter, according to market sources, who cited the reason as rising production from Indonesia and Malaysia combined with subdued demand. Industry insiders pointed to the Malaysian Palm Oil Board’s May 13 report, which according to them displayed the bearish narrative, with production up 21% m-o-m and end stocks up 20 percent. Both figures exceeded earlier estimates shared with Expana. Market participants noted that Malaysian inventories are now at their highest since October 2024 and represent the largest April level since 2021.
Market players expect supply pressure to persist, with further production increases likely in the coming months. If this occurs, Malaysian stocks could exceed 2 million mt, a level that typically signals oversupply and weighs on prices, sources said.
On the demand side, traders described the outlook as mixed. Malaysian exports rose 9 percent in April, short of the 12 percent increase many had anticipated. According to market sources, Indian imports dropped by over 1.4 million mt between November and April year-on-year. However, several traders noted low domestic inventories in India and signs of renewed interest, with some forward trades being reported. Industry insiders said palm has regained its role as the price floor in the vegetable oil complex, now trading $65/mt to $105/mt below soybean, rapeseed, and sunflower oil. This price discount vis a vis alternative oils has encouraged renewed buying from importers pivoting away from more expensive options.
According to market players, strong imports from India and other key buyers may resume later in 2025, particularly as supply pipelines remain thin beyond mid-year.
Traders also flagged the potential reinstatement of U.S. tariffs on Indonesian and Malaysian palm oil as a risk, saying that redirected volumes could worsen oversupply in Asia.
Forecasting insight
Palm oil prices have retreated from the highs late in Q4, and are now below the MYR 4,000/MT price level for the first time since Q3 2024. For a brief period, palm oil prices were not the least expensive oilseed, but this has since returned to normalcy. From a fundamental perspective, prices are in a small anti-bubble, which in isolation, puts some risk towards the idea of higher prices. This goes against the typical seasonal price fluctuations, which points towards declining prices to a Q3 2025 low. This would argue for the continuation of the recent price decline.
From a technical perspective, prices remain in a downtrend in the short term. Developments on the medium-term chart are perhaps more significant, showing that prices are now entering a medium-term downtrend. This would mean that prices are likely to decline for 6-12 months. The price peak came in Q4 2024, and therefore, this new medium-term downtrend calls for lower prices into H2 2025. Macro developments will certainly affect the duration of this trend, and this is an ever-changing situation. Expana will continue to monitor this closely, and if a hedging opportunity presents itself, we will look to mitigate any upside risk.
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