Palm oil under pressure: Malaysia faces market dynamics, export shifts, climatic challenges
This report breaks down the significant factors influencing price movements and highlights actionable strategies within the market’s volatility.
MALAYSIA – Malaysian palm oil futures (FCPO1!) are facing a pivotal moment in the third quarter of 2025, with prices lingering around MYR 4,190 (US$988.79) per metric ton, a 12% decline from the start of the year.
Malaysian palm oil futures are currently trading near RM4,063 (US$954.80) per tonne, prompting traders to closely monitor unstable export figures, potential supply disruptions linked to El Niño, and key technical resistance zones.
This report breaks down the significant factors influencing price movements and highlights actionable strategies within the market’s volatility.
Market dynamics
Malaysian palm oil futures continue to face selling pressure around the RM4,063 (US$954.82) resistance level, with prices slipping to RM4,200 (US$991.74) by mid-July.
Technical signals reveal fading bullish momentum: the 200-day SMA at RM4,050 (US$958.01) serves as a key threshold, with potential declines toward RM3,965 (US$951.60) and RM3,850 (US$908.55) if broken.
Indicators display mixed signals; the Parabolic SAR indicates short-term resilience, but the Hilo Channel and the Trend Seeker Composite Indicator flag a weakness, signaling a potential sell trigger.
Export shifts
Export performance remains the key driver of Malaysian palm oil prices in the short term.
A July export duty cut to 8.5% has boosted early-month exports by 12% year-over-year, helped by India’s rising demand, as importing 750,000 tons of palm oil proves significantly cheaper than soybean oil.
However, June exports dropped 10.5% due to port congestion in India. Traders are closely watching July’s full data release to assess whether strengthening demand can counterbalance high inventory levels.
Climatic challenges
El Niño’s expected return poses significant risks to Southeast Asia’s palm oil production. Experts forecast a 10–15% drop in yields by 2026 due to reduced rainfall, which could potentially lead to a tighter global supply.
Compounding the threat are structural issues, including ageing plantations that are 30% older than 25 years and ongoing labour shortages, which are already limiting production growth to just 0.5% for the 2025/26 period.
Opportunity zones in dynamic markets
Despite the volatile market conditions, Malaysian palm oil futures present both bullish and bearish trading setups.
Traders eye potential upside by buying near RM4,063 (US$975.12) and targeting breakouts above RM4,150 (US$979.81), driven by strong exports, higher crude oil prices, and Malaysia’s geopolitical pivot.
Conversely, short positions below RM3,950 (US$928.10) aim to hedge against oversupply risks, with downside potential to RM3,600 (US$849.60) if inventories swell and crude oil or soybean prices weaken.
Effective risk management relies on technical indicators, such as the 20-day EMA and RSI, in conjunction with fundamental metrics, including July export performance, El Niño forecasts, and MYR/USD fluctuations.
Malaysian palm oil futures are teetering in a fragile range, held back by profit-taking and export-related uncertainty, yet supported by the risk of El Niño and steady biodiesel demand.
Traders are advised to manage exposure carefully, with RM4,150 (US$979.81) as the key breakout point, while maintaining patience and tactical discipline in a volatile market.
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