Surge in Palm Oil: Year-High Amid Global Oil Price Rally

Quick look

• Malaysian palm oil futures hit over a year high, driven by robust rival edible and crude oil prices.
• Benchmark palm oil contract for May delivery surged 2.41% to 4,296 ringgit ($916.97).
• Dalian’s soy and palm oil contracts rose 2.06% and 3.34%, respectively.
• Unexpected drop in U.S. crude stockpiles and tensions in Ukraine boost oil prices.
• Malaysia’s palm oil inventories reach a seven-month low, with a significant production decline.
• Due to higher prices, India’s palm oil imports drop to a nine-month low.

Malaysian palm oil futures experienced a surge for the fourth straight session. The market witnessed highs not seen in over a year, buoyed by stronger edible and crude oil prices. The benchmark contract for May on the Bursa Malaysia Derivatives Exchange rose 101 ringgit to 4,296 ringgit.

Market Dynamics

The close of trading on Wednesday marked the contract’s highest point since March 9, 2023. Notably, Dalian’s active soy and palm oil contracts witnessed increases of 2.06% and 3.34%, respectively. In the U.S., soy oil prices on the Chicago Board of Trade climbed by 0.64%.

Related Oils Influence

Palm oil prices react to shifts in related oils as they vie for global market share. Additionally, an unexpected decrease in U.S. crude inventories and potential supply disruptions due to Ukrainian attacks on Russian refineries pushed oil prices higher. These factors make palm oil a more compelling biodiesel feedstock choice.

Inventory and Production Insights

February ended with Malaysia’s palm oil stocks at a seven-month low, following a 10-month production dip. Inventories fell 5% to 1.92 million metric tons. Production saw a 10.18% decline, while exports dropped significantly by 24.75%.

Import Trends

India’s palm oil imports in February reached a nine-month low. As a leading trade body reported, the price surge led buyers to favour sunflower oil over palm oil.

Global Market Watch

Asian shares hovered near seven-month peaks, with the market awaiting new drivers. Investors are keen on signals that could further illuminate the global interest rate easing cycle. Upcoming data includes U.S. initial jobless claims, PPI for machine manufacturing, and retail sales figures for February.