SunSirs: Ample Domestic Spot Supply of Palm Oil
23/09/2026 (SunSirs) - The current palm oil spot market is characterized by a loose supply-demand balance in the near term. Pressure on the spot market stems primarily from increased supply from Southeast Asian producing regions and high domestic inventory levels. However, demand trends diverge between domestic and international markets; the loose spot supply situation exerts downward pressure mainly on near-month contracts, with limited impact on distant-month contracts.
Regarding supply, Southeast Asia is currently in a seasonal production growth cycle. In Malaysia, palm oil production rose by 21.28% month-on-month during the first half of September, driven by simultaneous increases in fresh fruit bunch (FFB) yields and oil extraction rates, resulting in a steady release of output. Conversely, exports for the same period (September 1–15) fell by 17.8% month-on-month. The combination of rising production and weakening exports has led to an accumulation of local Malaysian inventories, creating supply pressure at the source. Domestically, commercial palm oil inventories at ports have reached 935,100 tonnes—up nearly 60% year-on-year and standing at a high level for this time of year—with further cargo arrivals expected, ensuring ample domestic spot supply.
Demand performance diverges between domestic and international markets. Internationally, India is entering its peak season for vegetable oil imports in the fourth quarter, raising expectations of a recovery in purchasing demand, while Indonesia continues to draw down domestic palm oil stocks driven by its biodiesel policy. In contrast, domestic demand for edible oils remains generally weak. With palm oil spot prices relatively high, most catering and food enterprises are limiting purchases to immediate needs and show little willingness to actively restock; this sluggish domestic spot demand limits the potential for short-term price increases.
Overall, the reality of a weak spot market is unlikely to reverse in the immediate future. However, as this factor primarily affects near-month contracts, the logic of supply contraction for distant-month contracts remains intact despite current spot market fundamentals. The tug-of-war between bulls and bears is concentrated on distant-month contracts, where bullish expectations hold the upper hand.