Malaysian Palm Oil Futures Rise Sharply on Stronger Asian Demand and Crude Oil Boost
Malaysian palm oil futures surged over 2% on Tuesday, buoyed by multiple bullish signals: India’s import duty reduction, stronger performance in China’s edible oil market, and rising crude oil prices that renewed palm’s appeal as a biodiesel feedstock.
The benchmark August contract on the Bursa Malaysia Derivatives Exchange jumped 89 ringgit or 2.29%, hitting 3,967 ringgit ($934.07) per metric ton by the midday break.
Key Drivers Behind the Rally
1. India Cuts Basic Import Tax on Crude Edible Oils
India—the world’s largest importer of palm oil—halved its basic import tax on crude edible oils from 20% to 10% on Friday, aiming to ease food inflation and support local refiners.
This import-friendly move is expected to boost short-term demand, especially with India’s monsoon season approaching, traditionally a time of higher vegetable oil consumption.
“The tax cut immediately raised expectations for stronger import flows, which is bullish for Malaysian palm,” said Darren Lim, commodities strategist at Phillip Nova.
2. Chinese Market Support: Dalian and Chicago Lead the Way
Edible oil markets in China and the U.S. also showed signs of strength:
-
Dalian’s most-active soyoil contract rose 0.52%
-
Dalian palm oil contract surged 1.53%
-
Chicago Board of Trade (CBOT) soyoil futures ticked up 0.3%
These gains provide technical and sentiment support to Malaysian futures, as palm oil often moves in tandem with other global edible oils due to their substitution effect in international markets.
3. Rising Crude Oil Prices Spur Biofuel Demand
Palm oil has become increasingly important in biodiesel production, particularly in Malaysia and Indonesia.
Recent upticks in crude oil prices, driven by geopolitical tensions surrounding Iran’s rejection of a proposed U.S. nuclear deal and a weaker U.S. dollar, have added another tailwind to palm’s upward momentum.
“With oil prices firming, palm oil becomes more viable for blending into biofuels,” noted Lim. “This creates an indirect yet important link between energy markets and edible oil demand.”
Supply Side: Exports Rebound, But Indonesia Lags
According to AmSpec Agri Malaysia, May exports of Malaysian palm oil products rose 13.2%, while Intertek Testing Services reported an even stronger 17.9% increase—a sign of robust outbound flows amid rising global demand.
Meanwhile, Indonesia, the world’s largest palm oil exporter, shipped 6.41 million metric tons of crude and refined palm oil from January to April 2025—a 5.37% decline year-on-year, according to official data.
This supply-side divergence between Malaysia and Indonesia may further support Malaysian prices in the coming weeks.
Technical Outlook: Range-Bound for Now
Despite the bullish sentiment, technical indicators suggest palm oil futures may be neutral in the short term, trading within a narrow band of 3,860 to 3,886 ringgit. A breakout from this range could signal a more decisive trend, according to Reuters technical analyst Wang Tao.
Conclusion
Palm oil markets are currently riding a wave of favorable policy moves, stronger regional demand, and supportive energy prices. With India stepping in to ease import taxes and China’s edible oil markets firming up, Malaysian palm oil is positioned for sustained strength—assuming geopolitical tensions and energy prices continue to provide cover.
As volatility remains high in the broader commodities space, palm oil’s performance will likely hinge on how these interconnected global dynamics evolve over the next few weeks.
