Positive export data for Malaysian palm oil in the first 20 days of June provided some market support. However, due to fluctuating international tensions, the restoration of traffic through the Strait of Hormuz has led to a significant retreat in international crude oil prices, pulling palm oil down from its highs. The market is expected to trend lower in the near term.
Crude Oil Pullback Drives Significant Palm Oil Drop
International crude oil prices have recently retreated from highs, primarily due to a relative easing of regional tensions and the resumption of navigation through the Strait of Hormuz, marking a significant shift in the Gulf crude market. Data shows that since June, the transit volume of Middle Eastern crude oil through the Strait of Hormuz has risen to about 4.9 million barrels per day. Although this is still far below the 2025 average of about 13 million barrels, it represents a significant rebound from the depressed levels during the period of heightened tensions. In early European trading on Thursday, the most active July Brent crude oil futures contract fell 1.3% to $72.88 per barrel, while WTI crude dropped 1.2% to $69.44. Both benchmarks have declined nearly 30% this month, with prices returning to levels seen before the tensions escalated.
As petro-diesel and biodiesel are substitutable, palm oil, a key feedstock for biodiesel, has followed the downward trend. As of June 25th, the domestic price for 24-degree palm oil was 9,003.75 yuan per ton, down 220 yuan or 2.39% from the previous trading day.
Weak Supply and Demand Fundamentals in Global Palm Oil Market
Currently, the global palm oil market continues to face significant supply pressure, while import volumes from major consuming countries have not shown substantial improvement, increasing downward pressure on palm oil prices.
Increased Malaysian Palm Oil Production
According to data from the Southern Peninsula Palm Oil Millers' Association (SPPOMA), Malaysian palm oil production for June 1-20, 2026, increased by 15.92% compared to the same period last month. This rise in production is unfavorable for price increases. However, improved export data for the first 25 days limited the downside. Shipment tracking data indicates Malaysia's palm oil exports for June 1-25 grew between 10.6% and 11.1% month-on-month.
Favorable Weather for US Soybean Crops
Weather conditions in the US soybean belt are conducive to crop growth, which from a related commodities perspective, is suppressing any upward movement in palm oil prices.
India's May Palm Oil Imports Show No Significant Improvement
Data from the Solvent Extractors' Association of India (SEA) shows India's palm oil imports in May rose slightly, rebounding from a four-month low hit in April, but remained below normal levels. May imports stood at 549,400 tonnes, up 7% month-on-month. For comparison, India's average monthly palm oil imports during the 2024/25 season were about 632,000 tonnes. The lack of significant improvement in import volumes is unfavorable for price strength.
Palm Oil Likely to Trend Lower with Volatility in July
With international tensions remaining volatile and the Strait of Hormuz navigation restoration agreement set for 60 days, the palm oil market is expected to primarily follow crude oil lower in the near term. Indonesia's Energy Ministry has stated that the country has issued regulations to implement a B50 biodiesel mandatory blending program starting July 1st, granting retailers a three-month transition period to clear existing inventories. This three-month transition period effectively delays the immediate impact of the policy. Market doubts about the country's enforcement capacity mean the policy offers no clear support for the market at present. Overall, the influence of crude oil on palm oil is significantly outweighing the impact of Indonesia's B50 policy. It is anticipated that the palm oil market may trend lower in July, fluctuating within a range around 8,800 to 9,500 yuan per ton.
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