Business Today (20/05/2025) - According to a report provided by the Malaysian Palm Oil Council (MPOC), Malaysian palm oil production increased significantly in April 2025, rising by 298,000 tonnes to reach 1.69 million tonnes, a 21.5% increase from March. This surge was partly due to delayed harvesting during the early March monsoon season.

MPOC further confirmed that production is expected to rise moderately from May through September, primarily due to the high base effect. In tandem with the production increase, palm oil stocks climbed by 303,000 tonnes, reaching their highest level in six months.

This accumulation was driven mainly by subdued export performance in March and April, with exports in April falling 11% from the previous month and 13% compared to April 2024. Domestic consumption also declined, contributing to the stock buildup.

Export demand showed regional variations. Sub-Saharan Africa led Malaysian palm oil exports with a 24% increase in the first four months of 2025, while the ASEAN region recorded an 8% growth. However, exports to other regions declined, reflecting uneven global demand.

Meanwhile, volatility has gripped the vegetable oil and energy markets over the past two months, spurred by growing trade tensions between the United States and China and OPEC’s decision to raise crude oil output from June. 

These factors have weakened sentiment in the energy sector. Since April, palm oil prices have dropped 18%, while soybean oil prices rose by 7%. Crude oil has also declined significantly, falling by 20% over the same period.

India has adjusted its import duties in response to these price changes, lowering the effective import duty on crude palm oil by USD15 compared to crude soybean oil in May. This adjustment is expected to enhance palm oil’s price competitiveness in India, supporting higher import volumes and potentially reducing soybean oil demand.

Similarly, palm oil’s price competitiveness in China has improved markedly. The price gap between palm olein and soybean oil narrowed from USD260 in December 2024 to just USD51 by mid-May 2025. 

This improved parity is anticipated to boost Chinese palm oil imports during the peak summer demand in June. On the other hand, China’s vegetable oil inventories remain comfortable at 1.76 million tonnes.

Global biodiesel demand, however, remains under pressure due to tight margins. These constraints have limited biodiesel blending to the mandated minimum in most markets. In the United States, biodiesel production fell by 24% in the first two months of 2025, dropping to 2.0 million tonnes from 2.7 million tonnes in the same period last year. 

Additionally, key feedstock consumption declined sharply—canola oil by 57%, soybean oil by 33%, and used cooking oil (UCO) by 31%. Overall, global biodiesel production is forecast to fall by 1.7 million tonnes this year, with the U.S. accounting for over half that decline.

In contrast, Indonesia’s biodiesel consumption remained stable, with a slight 2% increase in early 2025 and expectations to meet its annual target of 13.7 million tonnes.

Overall, the global vegetable oil market remains subdued, lacking strong bullish drivers. Weak energy prices continue to pressure biodiesel margins worldwide. Palm oil prices are expected to hold between RM3,750 and RM4,050 in May before gradually recovering. 

MPOC concluded that from June to September, import demand is forecast to shift in favour of palm oil, limiting further downside price risks.

Read more at https://www.businesstoday.com.my/2025/05/20/palm-oil-prices-poised-for-stability-before-gradual-climb/