FX.co ★ Palm Oil Declines on Output, Inventory Pressure

Malaysian palm oil futures declined by over 1%, dropping below MYR 4,190 per tonne. This decline reversed gains from the previous session and was largely influenced by the weakness in competing Dalian oils. Prices approached a three-week low as expectations of seasonally increased production rose, attributed to improved labor availability. Furthermore, Reuters estimated that inventories increased for the fifth consecutive month in July, reaching their highest point in nearly two years, driven by robust production and updated domestic consumption data. Shipments were anticipated to rise by 3.2% to 1.3 million metric tonnes, recovering from a decrease in June. Nonetheless, Malaysian exports faced limitations due to aggressive discounting from Indonesia, which expedited shipments to avoid the impact of impending higher tariffs. A stronger ringgit helped limit further declines, supported by data revealing a substantial 51.8% year-on-year increase in Malaysia's palm oil exports to the United States between January and May 2025, despite the U.S. being a relatively minor market. Demand from India, the leading buyer, is expected to remain strong ahead of the Diwali festival. Indonesia exported 11 million tonnes in the first half of 2025.