Palm oil futures strengthen following soybean oil, supported by weather concerns and geopolitical risks

(1) Malaysia Derivatives Exchange crude palm oil futures closed higher on Wednesday, with most contracts rising between 23 and 40 MYR. The near-month September contract rose to 4,654 MYR per ton, as the main contract gradually rolled over to later months. The premium structure of forward contracts reflects market concerns about future supply. (2) Strength in Chicago soybean oil futures provided direct price comparison support for palm oil, while crude oil prices remained firm amid ongoing US-Iran tensions. Expectations of stronger biodiesel feedstock demand were boosted, collectively fueling a recovery in market sentiment. (3) El Niño weather remains a key variable on the supply side. The Malaysian Meteorological Department stated that the probability of reaching a super El Niño level between October and December has risen to over 90 percent. High temperatures and drought may weaken palm oil output in coming months, further heightening market expectations of tighter supply. (4) Traders expect support around 4,850 MYR per ton, with resistance at the 4,980 MYR level. Trading volume fell back on the day, but open interest expanded slightly, indicating that some funds are still positioning for weather-related premiums. The spot market strengthened accordingly, with September spot prices in the southern region rising by 30 MYR to 4,640 MYR per ton.