FX.co ★ Palm Oil Set to Close Month with Modest Losses

Malaysian palm oil futures continued their downward trend for a third consecutive session, trading below MYR 4,400 per tonne. This dip was influenced by weaker performances from competing oils on the Dalian exchange, compounded by the upcoming October 1-8 holiday in China. Additionally, Chicago soyoil experienced a downturn overnight, linked to falling crude oil prices amid supply concerns, while market participants remained cautious ahead of anticipated export estimates for September from cargo surveyors.

On a monthly scale, palm oil prices are poised to record their first decline in four months, falling approximately 0.75%. This downturn is attributable to expected peak production in October, spurred by favorable weather conditions. Moreover, external factors, such as the potential for a U.S. government shutdown, continue to overshadow market sentiments. China's latest Purchasing Managers' Index (PMI) surveys present a mixed picture, showing an improvement in the manufacturing sector against a slowdown in services.

Despite these challenges, certain factors are cushioning the losses. The ringgit's weakness and statements from the Malaysian Palm Oil Board suggest that palm oil stocks might decrease to 1.7 million tonnes by the end of the year, as seasonal output wanes and exports increase due to festive demand. Furthermore, robust purchasing activity from India is anticipated, with projections for edible oil imports expected to reach a record high of 17.1 million tonnes in 2025/26.