Palm oil futures experienced a significant downturn during the week, marking its most substantial weekly decline in over a year. Traders grappled with uncertainties surrounding escalating tensions in the Middle East alongside apprehensions about slowing demand for palm oil products. The benchmark palm oil contract for July delivery on the BMD Exchange witnessed a downward trend, settling at 3,928 ringgit ($821.59) per metric ton, reflecting a decline of 1.41% or 56 ringgit. 

• Impact of Middle East Tensions

Traders intensified amidst concerns over escalating tensions in Middle East. Prospect of a prolonged conflict in region led to apprehensions about potential disruptions in crude oil supplies, consequently exerting upward pressure on crude oil prices & indirectly influencing palm oil prices.

• Demand Dynamics

Despite the geopolitical uncertainties, weaknesses in the prices of competing vegetable oils have also contributed to the downward pressure on palm oil prices. This competitive landscape has dampened the demand for palm oil, thereby limiting its potential for price gains.

Influence of Related Oils on Palm Oil Market

The performance of palm oil is intricately linked to that of related oils, as they compete within the global vegetable oils market. Notably, Dalian’s most-active soyoil contract experienced a decline of 0.6%, while its palm oil counterpart saw a decrease of 0.97%. Similar trends were observed in soyoil prices on the Chicago Board of Trade, where prices eased by 0.6%.

Outlook for Malaysian Palm Oil Contracts

The outlook for Malaysian palm oil contracts remains subdued, with forecasts indicating a potential decline of nearly 7% for the week. This anticipated downturn would mark the second consecutive weekly decline, driven by projections of increased output during the second quarter of 2024. Favorable weather conditions and heightened productivity following the conclusion of Ramadan have contributed to these forecasts. Additionally, monthly data from industry regulators revealed a significant increase in palm oil production, climbing by 10.57% to 1.39 million tons by the end of March.

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In conclusion, Malaysian palm oil market reveals a delicate interplay of domestic and global factors. As these uncertainties, a comprehensive understanding of the evolving dynamics for Palm trade in Bearish Position due to narrow gap between rival soft edibles oils, it may hovering in the range of MYR3,900 to MYR4,200 per ton.