Malaysian palm oil futures rise with Dalian soyoil, head for weekly gain

Palm oil advances in early trade

Malaysian palm oil futures opened higher on May 23 and headed toward a weekly gain, supported by firmer soyoil prices in China and the United States. Reuters reported that the benchmark August contract on the Bursa Malaysia Derivatives Exchange rose 22 ringgit, or 0.58%, to 3,842 ringgit ($903.57) per metric ton in early trading.

The contract had gained 1.13% over the week. That relatively modest increase indicated support across the vegetable-oil complex without a decisive breakout in palm oil itself. The market was receiving positive signals from competing edible oils, but currency movements and energy prices were working in the opposite direction.

Dalian and Chicago provide support

The most-active Dalian soyoil contract increased 0.13%, while soyoil futures on the Chicago Board of Trade rose 1%, according to Reuters. These gains supported Malaysian palm oil because the commodities compete for demand in the global vegetable-oil market. Changes in the relative prices of palm, soybean and other edible oils can influence purchasing decisions by processors and importers.

The signal from China was not uniformly positive. Dalian’s most-active palm olein contract declined 0.3%, showing that the strength was concentrated in soyoil rather than spread evenly across the Chinese vegetable-oil market. For palm traders, the divergence limited the conviction behind the Malaysian advance.

Crude oil and currency cap the increase

Crude oil prices slipped as a stronger US dollar and the possibility of another OPEC+ production increase weighed on the energy market. Lower crude prices reduce the attractiveness of palm oil as a biodiesel feedstock, weakening one channel of demand that connects vegetable oils with global energy markets.

The Malaysian ringgit also strengthened 0.42% against the dollar. Because Bursa palm oil contracts are priced in ringgit, an appreciation makes the commodity more expensive for buyers using other currencies. The exchange-rate movement therefore offset part of the support supplied by Dalian and Chicago soyoil.

Resistance levels frame the next move

Reuters technical analyst Wang Tao said palm oil could test resistance at 3,883 ringgit per metric ton. A break above that level could open the way toward 3,927 ringgit. From the early-trade price of 3,842 ringgit, the first resistance level remained close enough to focus short-term trading, but the 1.13% weekly gain still pointed to a measured recovery rather than a broad rally.

For producers and exporters, the rise offered limited price relief, while importers faced a mixed picture: stronger competing oils supported palm values, but weaker crude reduced biodiesel-related demand incentives. The firmer ringgit also raised the foreign-currency cost of Malaysian supply. The next direction depended on whether strength in international soyoil could overcome those two constraints.