Palm Oil Holds Strong Above 4,300 Ringgit: Biodiesel Demand, Soybean Tightness, and Supply Constraints Drive Market Momentum

Market Overview: Palm Oil Prices Defy Gravity

 

Palm oil prices in Malaysia are expected to remain elevated above the 4,300 ringgit per tonne mark, according to the Malaysian Palm Oil Council’s latest assessment. This bullish outlook is underpinned by a confluence of structural and seasonal factors, including robust biodiesel demand, tightening global soybean oil supplies, and slower-than-expected growth in palm oil production across key producing regions.

As of August 19, 2025, local crude palm oil (CPO) prices have consistently traded between 4,600 and 4,800 ringgit per tonne, with the average for August so far hovering around 4,740 ringgit. This marks a significant premium over soybean oil, which has been fluctuating between USD 950 and USD 1,050 per tonne in the US market.

 

Key Drivers Behind the Price Resilience

 

Biodiesel Demand Surges in Indonesia

 

- Indonesia’s push toward B40 biodiesel blending is absorbing nearly all of its projected 2 million tonne production recovery in 2025.

- This domestic consumption surge is expected to limit export availability, tightening global supply.

- Malaysia’s own biodiesel program continues to support domestic demand, further reducing exportable volumes.

 

Soybean Oil Market Tightens

 

- Despite upward revisions in US soybean production, soybean oil prices remain firm due to policy uncertainty around biofuel blending under the current US administration.

- The premium palm oil commands over soybean oil has widened, reinforcing its competitiveness and demand in key importing countries.

 

Sluggish Palm Oil Supply Growth

 

- Malaysia’s palm oil production is forecast to remain flat at 19.5 million tonnes in 2025.

- Indonesia’s output recovery is being offset by biodiesel demand, leaving global supply growth muted.

- Seasonal factors, including the monsoon’s lingering impact and public holidays in January, have already curtailed harvesting activities earlier this year.

 

Inventory Trends and Export Dynamics

 

- Malaysia’s palm oil inventories ended 2024 at 1.71 million tonnes, a sharp decline driven by higher domestic consumption and reduced imports from Indonesia.

- Imports fell dramatically to just 253,000 tonnes in 2024, down 72 percent from previous years.

- This trend is expected to persist, keeping inventory levels below average through Q1 2025.

- Export volumes in December 2024 stood at 1.34 million tonnes, consistent with historical norms but insufficient to offset production shortfalls.

- Combined domestic consumption and exports reached 1.65 million tonnes in December, outpacing production of 1.48 million tonnes and further draining stockpiles.

 

Seasonal Outlook and Demand Trends

 

- Palm oil consumption typically rises during January and February due to Chinese New Year and Ramadan festivities.

- However, production during these months is expected to remain subdued due to fewer harvesting days and residual weather disruptions.

- This seasonal mismatch between demand and supply is likely to keep prices buoyant well into the first quarter of 2025.

 

Conclusion: Price Outlook Remains Firm

 

The Malaysian Palm Oil Council projects that palm oil prices will continue to hold above the 4,300 ringgit threshold in the near term. With biodiesel programs absorbing supply, soybean oil markets remaining tight, and palm oil production growth stagnating, the fundamentals point to sustained price strength.

 

For stakeholders across the supply chain—from producers and refiners to traders and importers—this environment presents both opportunities and challenges. Strategic inventory management, pricing hedges, and demand forecasting will be critical in navigating the months ahead.

 

Source: Malaysian Palm Oil Council (MPOC)