Malaysian palm oil futures demonstrated a notable reversal on Monday, overcoming early losses and terminating a four-session decline streak. The market saw an upward trend, driven by concerns surrounding diminished January output and a weaker Malaysian ringgit.

Closing at 3,799 ringgit ($800.13), the benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange recorded a gain of 35 ringgit or 0.93%. The day commenced with the contract opening lower, aligning with the performance of Chicago Board of Trade (CBOT) soyoil and Chinese vegetable oil futures. However, the market swiftly rebounded, mitigating the initial losses.

Preliminary estimates played a pivotal role in reshaping market sentiment. These projections suggested a decline in Malaysian palm oil stocks, propelled by a nearly double-digit reduction in production and a substantial drop in exports during January. Anilkumar Bagani, the research head at Mumbai-based vegetable oils broker Sunvin Group, remarked that stocks were anticipated to exhibit a 6% decline, with production experiencing a 9% drop and exports contracting by 9.3% from December.

Malaysia's palm oil stocks experienced a three-month consecutive decline until the end of January. This trend aligns with the seasonal low production phase in the world's second-largest palm oil producer. As per estimates from ten traders, planters, and analysts, palm oil stocks were expected to decrease to 2.14 million metric tons, marking a 6.62% reduction from December. Additionally, crude palm oil output was projected to stand at 1.37 million tons in January, representing an 11.83% decline from the previous month. The Malaysian Palm Oil Board (MPOB) is scheduled to release its monthly data on February 13.

In tandem with these developments, India witnessed a decline in palm oil imports to a three-month low in January. This decline was attributed to refiners increasing purchases of rival soyoil, driven by negative refining margins for crude palm oil (CPO). The weakening of the Malaysian ringgit against the dollar, down by 0.7%, further contributed to the market dynamics, making palm oil more affordable for buyers holding foreign currency.

Key movements in related oils also influenced palm oil prices. Dalian's most active soyoil contract experienced a 0.75% fall, while its palm oil contract incurred a 0.37% loss. Meanwhile, CBOT soyoil prices recorded a 0.49% increase.

The global geopolitical landscape also played a role in shaping market dynamics. Oil prices experienced a modest rise on Monday, rebounding from significant declines the previous week. This shift was attributed to Washington's commitment to launch additional strikes on Iran-backed groups in the Middle East and Ukrainian drones targeting southern Russia's largest refinery. The resilience in crude oil futures rendered palm oil a more appealing option for biodiesel feedstock.