I. Bottom Line & Directional Bias
Direction: Bearish.
Three core reasons: First, the price structure is weak. The DCE.Y main contract settled at 8,934 CNY/t on September 30; although it was +1.32% versus the prior settlement on the day, the 5-day cumulative was only +0.3% and the 20-day cumulative was -1.38%. Within the 20-day channel of 8,817–9,286 CNY/t, it sits at only the 33% position, a weak bounce at the lower edge of the range rather than a trend reversal. Second, the nature of the flows does not support upside. Main-contract open interest was 600,545 lots, down 11,721 lots on the day; notional main-contract open interest was 53.88 billion CNY, down 1.052 billion CNY on the day. Price rose while open interest fell, which is a short-covering rally (open interest cut), lacking confirmation from active long-position building. Third, there is no upward driver from the international market or the cost side. ZL=F settled at 68.28 cents/lb, -5.99% over 20 days, at the 26.1% low percentile of its 20-day range; U.S. soybean crush margin was 2.43 USD/bushel, at the 51.19% 1-year percentile, neutral-to-weak.
Conditions that would invalidate the direction: If the DCE.Y settlement price effectively closes above the 20-day high of 9,286 CNY/t, or if the international market ZL=F settlement price recovers to 73 cents/lb, the bearish view is invalidated and we move to a wait-and-see stance.
II. Price Action & Technicals
The DCE.Y main contract closed at 8,972 CNY/t on September 30 and settled at 8,934 CNY/t, +1.32% versus the prior settlement, +0.3% over 5 days, and -1.38% over 20 days. The 20-day channel is 8,817–9,286 CNY/t, and the current settlement price sits at the 33% position of the channel, i.e., the lower-middle edge of the range. ATR14 is 113.5 CNY/t (1.27% of price, intraday full-range basis), and RV20 is 10.5%. Realized volatility is at a low level, indicating that recent price action has been predominantly narrow-range consolidation; the single-day gain of +1.32% does not constitute a trend signal against a low-volatility backdrop.
Pivot system: P is 8,942.3 CNY/t, R1 is 9,014.7 CNY/t, S1 is 8,899.7 CNY/t. The current settlement of 8,934 CNY/t is slightly below P, in the narrow zone between P and S1; the distance between R1 and the settlement price is about 80.7 CNY/t, and the distance between S1 and the settlement price is about 34.3 CNY/t, both less than one ATR14 (113.5 CNY/t). Therefore, neither R1 nor S1 is used as an effective trading level, only as a range reference.
Weekly basis: The last closed weekly candle was 2026-09-21 to 2026-09-24, with an open of 8,880, a high of 8,987, a low of 8,868, and a close of 8,962 CNY/t, a weekly change of +0.98%, a slightly positive consolidation weekly candle. This week (3 trading days from 2026-09-28) has not yet closed and is currently quoted at 8,972 CNY/t (+0.11%); no weekly conclusion is drawn on this basis.
International market comparison: ZL=F settled at 68.28 cents/lb, -0.12% on the day, +0.69% over 5 days, -5.99% over 20 days; ATR14 is 1.4 (2.06% of price), RV20 is 20.7%, with volatility significantly higher than the Chinese market; the 20-day range is 66.61–73, position 26.1%, and the 52-week range is 47.51–79.69. The international market is at the low percentile of its 20-day range and its 20-day decline is markedly larger than that of the Chinese market. International and Chinese market trends have diverged, and international market weakness exerts upward pressure on the Chinese market.
Overall technical picture: Low volatility in the Chinese market, lower-middle edge of the range, low percentile in the international market; the price structure is weak, and the bounce lacks confirmation from volume and volatility.
III. Supply-Demand Balance & Fundamental Drivers
Inventories and balance sheet: This data set does not include soybean oil commercial inventories, port inventories, or WASDE and other balance-sheet data. Therefore, no quantitative judgment is made on absolute inventory levels or comparisons with the same period over five years; only the available price and margin indicators are discussed.
Crush margin: U.S. soybean crush margin was 2.43 USD/bushel (2026-09-30), versus 2.57 USD/bushel 20 trading days ago, at the 51.19% 1-year percentile. The crush margin has edged down from 20 days ago and is near the one-year median, implying neither an expectation of higher crush volumes driven by high margins nor an expectation of crush contraction driven by losses; the pass-through to the soybean oil cost side is neutral-to-slightly-weak. A decline in the crush margin means the combined value of U.S. soybean downstream products has weakened relative to the raw material, providing no upward pull for soybean oil prices.
International market linkage: ZL=F settled at 68.28 cents/lb, -5.99% over 20 days, at the 26.1% low percentile of its 20-day range. Weakness in the international soybean oil market directly caps the upside for Chinese soybean oil. Chinese soybean oil and international soybean oil are linked through import cost pass-through; continued international weakness means the center of gravity of import costs is shifting lower, and the Chinese market's bounce faces a ceiling.
Macro transmission: The U.S. dollar index was 101.46 (+0.09%), and the U.S. 10-year Treasury yield was 5.293 (+0.72%). The dollar and Treasury yields strengthened in tandem, exerting valuation pressure on USD-denominated commodities and transmitting to Chinese oils through the import cost channel. Rising Treasury yields reflect a tighter rate environment, which is not conducive to broad commodity valuation expansion.
Overall fundamentals: Neutral-to-slightly-weak crush margin, low-percentile weakness in the international market, and a firm dollar and Treasury yields — none of these three drivers supports an upside breakout in soybean oil prices, and the fundamentals lean toward pressure.
IV. Positioning & Fund Flows
Main-contract positioning: DCE.Y main-contract open interest was 600,545 lots, -11,721 lots on the day; notional main-contract open interest was 53.88 billion CNY, a daily change of -1.052 billion CNY. Price rose +1.32% on the day while open interest fell, a classic short-covering rally (open interest cut), i.e., the upside momentum came from short covering rather than new long-position building. The sustainability of such rallies is typically weaker than that of rallies accompanied by open interest build.
Top 20 seats: Long positions were 1,012,798 lots, -14,248 lots on the day; short positions were 1,111,418 lots, -21,104 lots on the day; net short was 98,620 lots, with net short increasing by 6,856 lots on the day. Both longs and shorts reduced positions, but the short reduction (-21,104 lots) exceeded the long reduction (-14,248 lots), and the net short position actually increased by 6,856 lots. This indicates that during the price bounce, the top 20 seats showed a stronger willingness to exit longs than shorts, further reinforcing the net short structure, diverging from the single-day price gain.
Divergence interpretation: Price rose +1.32% on the day, but main-contract open interest fell and top-20 net short increased. The divergence between price and positioning structure indicates that this bounce lacks institutional long-fund absorption, and the quality of the bounce is low.
Reference macro volatility indicators: ^VIX was 16.34 (+0.3 points, 33% 1-year percentile), ^OVX was 52.24 (-1.5 points, 52% 1-year percentile), ^GVZ was 23.74 (-0.63 points, 20% 1-year percentile), ^VXSLV was 37.87 (-1.26 points). Overall macro volatility is at a neutral-to-low level, with no risk-event-driven volatility spike, consistent with soybean oil's low RV20 of just 10.5%, further confirming that the current environment is consolidation rather than a trending market.
Overall positioning structure: Short-covering rally, rising net short, low volatility — the fund flow picture is bearish.
V. Cross-Asset & Onshore-Offshore Value
International vs. Chinese market comparison: DCE.Y settled at 8,934 CNY/t, and ZL=F settled at 68.28 cents/lb. Based on price action alone, ZL=F was -5.99% over 20 days versus DCE.Y at -1.38% over 20 days; the international market's decline was significantly larger than the Chinese market's, making the international market relatively weaker.
Volatility comparison: ZL=F's ATR14 is 2.06% of price and RV20 is 20.7%, while DCE.Y's ATR14 is 1.27% of price and RV20 is 10.5%; international market volatility is roughly twice that of the Chinese market. The international market is highly volatile and at the 26.1% low percentile of its 20-day range, meaning international downside risk has not yet been fully released, and the Chinese market's low-volatility state may be broken by volatility transmission from the international market.
Related macro assets: The U.S. dollar index was 101.46 (+0.09%), and the U.S. Treasury yield was 5.293 (+0.72%). The dollar and Treasury yields strengthened in tandem, exerting cross-asset valuation pressure on soybean oil.
Relative value conclusion: The international market is weaker than the Chinese market, international volatility is higher than Chinese volatility, and the dollar and Treasury yields are firm; both the cross-asset and international-vs-Chinese-market dimensions lean toward pressuring Chinese soybean oil.
VI. Historical Statistics & Seasonality
Seasonality statistics: Over the past 8 years, for the 20 trading days starting on the same date, soybean oil averaged +0.82%, with a median of +3.83%, and rose in 4 of 8 years; the best year was 2019 at +7.41%, and the worst year was 2018 at -5.85%.
Statistical interpretation: The median of +3.83% is notably higher than the average of +0.82%, indicating a right-skewed distribution, where large gains in a few years pulled up the median while the average was dragged down by down years such as 2018's -5.85%. Gains occurred in 4 of 8 years, a hit rate of exactly 50%, meaning the seasonal direction offers no clear edge. The sample is only 8 years, so statistical power is limited; this is for background reference only and does not constitute a directional basis.
Combined with the current structure: The seasonal median is positive, but the hit rate is only 50% and the sample is limited, so it cannot offset the current bearish signals of a weak price structure, position reduction, and a low percentile in the international market. Seasonal factors are not used as a basis for directional judgment in this report.
VII. Scenario Analysis
Base Case (55% probability): Bearish range-bound. Trigger conditions are ZL=F holding weak near 68 cents/lb in the international market, continued decline in China's main-contract positioning, and no fresh long capital entering. Under this scenario, DCE.Y trades weak within a range between the lower bound of the 20-day channel at 8,817 CNY/t and the pivot P at 8,942.3 CNY/t, with upside capped near R1 at 9,014.7 CNY/t. Corresponding action: maintain a bearish bias, refrain from chasing longs on rebounds above P, and wait for a pullback confirmation.
Bullish Scenario (20% probability): Upside breakout. Trigger conditions are ZL=F settling back above 73 cents/lb (upper bound of the 20-day range) in the international market, or active long accumulation in China (open interest and price rising in tandem), or the US Dollar Index breaking below the 100 mark. Under this scenario, DCE.Y could push toward the 20-day high of 9,286 CNY/t. Corresponding action: if the settlement price effectively holds above 9,286 CNY/t, the bearish call is invalidated, and shift to a wait-and-see stance or a light long probe.
Bearish Scenario (25% probability): Accelerated downside. Trigger conditions are ZL=F breaking below 66.61 cents/lb (lower bound of the 20-day range) in the international market, or further strengthening of the US Dollar Index and US Treasury yields, or continued expansion of net shorts among China's top 20 seats. Under this scenario, DCE.Y will break below the 20-day low of 8,817 CNY/t, opening further downside. Corresponding action: add to bearish positions after a break below 8,817 CNY/t, with stop-loss set roughly 1 ATR14 (113.5 CNY/t) above the entry price.
The three scenario probabilities sum to 100%. The base case direction is consistent with the bearish conclusion in Section I.
VIII. Trading Strategies & Risk Management
Strategy One (bearish, primary strategy): Entry zone 8,930–8,970 CNY/t (current settlement near 8,934 CNY/t), stop-loss above 9,080 CNY/t (more than roughly 1 ATR14 from entry), Target One 8,817 CNY/t (lower bound of the 20-day channel), Target Two 8,750 CNY/t. Horizon 1–5 trading days, position size no more than 10% of total capital, conviction 6.
Strategy Two (bearish, add-on condition): If the settlement price breaks below 8,817 CNY/t (20-day low), add to bearish positions, entry near 8,810 CNY/t, stop-loss above 8,930 CNY/t, target 8,650 CNY/t. Horizon 3–8 trading days, position size no more than 5% of total capital, conviction 5.
Risk Management: Cap single-trade risk within 1.5% of total capital; if DCE.Y settlement effectively holds above 9,286 CNY/t (20-day high), or ZL=F settlement recovers to 73 cents/lb in the international market, stop out of all bearish strategies. Watch the impact of the October 2 US Nonfarm Payrolls data (expected 89K, prior 162K) on the US Dollar Index; if the data comes in well below expectations and weakens the dollar, it could trigger a broad commodity rally, requiring timely reassessment of bearish positions.
IX. This Week's Data Calendar
At 20:30 Beijing time on October 2, US Average Hourly Earnings MoM (expected 0.3%, prior 0.3%), Nonfarm Payrolls Change (expected 89K, prior 162K), Unemployment Rate (expected 4.1%, prior 4.1%), affecting commodity valuations via the dollar transmission channel. At 22:00 on October 5, US ISM Services PMI (expected 54, prior 55.4). At 04:30 on October 7, API Crude Oil Inventory Change; at 22:30 on October 7, EIA Crude Oil and Gasoline Inventory Changes. At 02:00 on October 8, FOMC Meeting Minutes. The above events primarily affect soybean oil valuations indirectly through the dollar and interest rate channels.
This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.