Bullish Factors Remain, May Palm Oil Prices Expected to Rise in China

April 29 news

According to SpotCom data: In April, the palm oil market in China weakened, with prices oscillating downward, decreasing by more than 1%. At the beginning of the month, the average market price for palm oil was 9,750 CNY/ton. By April 28, the average market price for palm oil had fallen to 9,644 CNY/ton, a decrease of 1.09%.

The main factors influencing the April palm oil market are as follows:

Supply Side: Malaysian palm oil is in a production expansion cycle coupled with weak exports, leading to a deterioration in fundamentals. From April 1 to 20, Malaysia’s palm oil production rose by 17.52% month-on-month, entering a seasonal production peak. Both yield per hectare and oil extraction rate increased simultaneously, putting upward pressure on supply. Between April 1 and 25, Malaysia’s palm oil export volume fell by 15.7% to 16.8% month-on-month. Demand from major importing countries remains weak, and high prices are discouraging purchases, causing exports to “collapse” and increasing the risk of inventory accumulation.

Chinese inventories are high and demand is weak, limiting the room for a rebound. Port inventory has decreased slightly but remains at a high level, with normal imports arriving and cautious purchasing.

Crude Oil: Geopolitical uncertainties keep energy support “strong yet unstable.” Middle East Situation: U.S.-Iran negotiations remain fraught with setbacks, and navigation through the Strait of Hormuz is intermittently disrupted, intensifying crude oil price volatility. The energy premium for palm oil fluctuates in tandem with oil prices.

Demand: Demand for catering and food processing remains weak, leading to increased substitution with soybean oil and rapeseed oil, which in turn is suppressing palm oil consumption.

Import costs: Import profits are inverted, limiting import volume, yet it remains difficult to alleviate high inventory pressure.

Weather and Forward-Looking Expectations: El Niño Has Become the “Final Straw for Bullish Traders.” After March, Southeast Asia is expected to see below-average rainfall. Market expectations suggest that a moderate-strength El Niño could emerge between June and August, potentially impacting second-half-year production.

Palm Oil Spotcom Analysis: From the price trend chart of palm oil, key indicators show that at the end of March, the 10-day moving average of palm oil crossed below the 20-day moving average, and at the beginning of April, the 10-day moving average of palm oil crossed above the 20-day moving average. By the end of April, the 10-day moving average continued to cross above the 20-day moving average, with the positive difference expanding and the upward trend accelerating. At the beginning of April, the spot market for palm oil showed mixed trends, with a downward oscillation. Starting from late April, the palm oil market welcomed an upward trend. An increase in the palm oil market is expected in May.

Auxiliary Indicator: As of the end of April, palm oil prices reached their 10-day high and their 20-day high, indicating that, in the long term, there is limited room for further price increases in the palm oil market. To sum up, in May, China’s palm oil fundamentals remain mixed, with both bullish and bearish factors at play. Production regions are entering a period of increased output, futures prices remain volatile, and China’s rigid demand for palm oil is on the rise, leading to a market trend characterized primarily by oscillating price increases.

From a technical perspective, it can be seen that at the end of April, the palm oil market in China is at a high level, with limited room for further price increases. In May, the palm oil market in China will mainly experience wide fluctuations, with strong momentum for an increase, and it is expected that prices will range between 9,700 CNY/ton and 10,000 CNY/ton.