On Tuesday, October 27, the main palm oil futures contract weakened sharply, breaking below key support on heavy volume with losses exceeding 3%, while BMD crude palm oil opened lower and moved down in tandem.
The vegetable oil complex broke down and declined, tracking the pullback in import costs. Domestic inventory pressure remains substantial, with palm oil stockpiles sitting at elevated levels. In the near term, palm oil is expected to trade in a weak, range-bound fashion, and the market will continue to monitor geopolitical conflicts, changes in import costs, and end-user consumption.
The market had previously been persistently speculating on Malaysia's crude palm oil export tax exemption policy, but the policy has yet to be officially implemented, causing bullish expectations to be gradually disproven and prompting concentrated profit-taking and exits by funds. At the same time, origin FOB quotations were actively lowered, directly pushing down domestic palm oil import costs. Currently, domestic palm oil inventories are at high levels, and forward vessel purchases remain sizable, keeping arrival pressure elevated going forward.
Overall, this round of price action represents a return from expectation-driven trading to the logic of spot costs. In the short term, the market's center of gravity will track Malaysian palm oil export quotations and crude oil fluctuations; over the medium term, it remains constrained by seasonal production increases in Southeast Asia and domestic inventory buildup pressure.
The market is still watching the impact of El Nino weather on palm oil, but the window for weather-related production cuts to materialize leans toward 2027, which falls under far-month pricing logic and is unlikely to support near-month contracts. At the current stage, real supply-demand tensions—including high near-term inventories, seasonal production increases, and loosening import costs—are dominating, while the far-month weather premium is converging in stages.
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