Palm Oil Market Firms on Futures Strength and Tightening Asian Supply Controls

Palm oil prices are consolidating at elevated levels, with nearby MDEX crude palm oil (CPO) futures holding above MYR 4,500/t and the forward curve only modestly softer into 2027. Tightening Asian supply policies – notably Thailand’s new export licensing regime – and robust biofuel demand are underpinning the market despite competition from other vegetable oils.

The current palm oil environment is shaped by firm futures, structurally higher biodiesel demand and policy-led supply restraint. On the MDEX, the June 2026 contract settled at MYR 4,609/t on 9 April, with successive 2026 expiries trading in a narrow premium band, signalling a well-supported but not overheated market structure. At the same time, the U.S. biodiesel sector is set for a sharp expansion, reinforcing global vegetable oil demand, while Thailand’s move to control crude palm oil exports from early April adds a fresh bullish impulse to regional fundamentals. Weather risks, a broader energy shock in Southeast Asia and shifting import needs in India and China round out a cautiously firm price outlook.

📈 Prices & Curve Structure

MDEX CPO futures show a firm nearby structure with only gradual softening along the curve:

Contract	Settlement (MYR/t)	Change (d/d)
Apr 2026	4,515	-3 (-0.07%)
May 2026	4,578	+21 (+0.46%)
Jun 2026	4,609	+23 (+0.50%)
Jul 2026	4,617	+24 (+0.52%)
Sep 2026	4,575	+24 (+0.52%)
Nov 2026	4,526	+27 (+0.60%)
Mar 2027	4,429	+6 (+0.14%)
Nov 2027	4,345	-6 (-0.14%)

Converted at roughly 1 EUR = 4.75 MYR, front-month CPO is trading near EUR 950/t, with late‑2027 deliveries closer to EUR 915–920/t. This relatively flat backwardation reflects expectations of only modest supply relief ahead, consistent with recent analyst revisions that now assume average CPO prices of MYR 4,300–4,500/t for 2026–27, up from earlier MYR 4,000/t baselines.

🌍 Supply & Demand Drivers

Biodiesel and vegetable oil demand: U.S. Renewable Fuel Obligations (RVO) envisage an expansion of bio-based diesel output from 11.0 million tonnes in 2025 to 17.9 million tonnes in 2026 and 18.9 million tonnes by 2027. This strongly supports global vegetable oil demand, led by soyoil but indirectly lending a floor to palm oil prices as refiners and traders arbitrage spreads between oils.

In Southeast Asia, Thailand – the third-largest palm oil producer – has introduced export controls requiring licences for crude palm oil shipments from 7 April 2026, prioritising domestic biodiesel blending amid high international prices. This effectively tightens regional exportable supply, amplifying the supportive impact of higher biodiesel mandates in Malaysia and Indonesia.

Competing oils and regional flows: While the policy push favours soyoil, recent weakness in soybean prices has not translated into a significant drag on palm oil, as processing margins and capacity additions in North America continue to channel soy-based feedstocks into biofuels. On the physical side, Ukraine maintains competitive pricing in soy and sunseed complexes, but palm oil retains a structural cost advantage into price-sensitive destinations, especially when freight from the Black Sea remains volatile.

In India – one of the largest palm importers – rapeseed is gaining ground, with 2026 production expected at 12.1 million tonnes (+2%), compared with a 3% drop in soybean output to 10.35 million tonnes. This shift supports higher local crush of rapeseed and growing use of rapeseed meal, but India still covers about two thirds of its vegetable oil needs via imports, ensuring continued baseline demand for palm oil despite changing domestic oilseed balances. Meanwhile, Malaysia’s January 2026 trade data show palm oil export values down slightly year-on-year on lower prices, even as volumes rose, suggesting importers have cautiously re‑entered the market as prices stabilised around current levels.

📊 Fundamentals & Weather

Stocks and production: After a period of elevated inventories at the end of 2025, Malaysia’s palm oil stocks have been trending lower into early 2026 on reduced output and steady export demand, with market surveys pointing to a third consecutive monthly draw in March. Recent flooding in Sabah and a broader regional fuel and logistics crunch linked to the Iran war have further constrained near‑term production and transport capacity, reinforcing the current tightness.

Weather outlook: Seasonal forecasts for March–May indicate above‑average temperatures across much of maritime Southeast Asia, including key palm belts in Indonesia and Malaysia. While not yet translating into acute yield losses, persistent heat increases the risk of tree stress and future output downgrades, particularly if accompanied by sub‑par rainfall. Against this backdrop, any fresh weather disruptions – storms or extended dry spells – would likely be met with an outsized price response given already constrained regional supply.

Policy overlay: Thailand’s one‑year suspension of crude palm oil exports, effective 7 April 2026, is the most immediate policy shock, effectively removing a portion of flexible supply from the global market at a time when Malaysia and Indonesia face their own energy and logistics headwinds. Combined with U.S. and EU biofuel policy support, this raises the floor under CPO prices even if demand from some traditional markets remains price-sensitive.

📆 Short-Term Outlook & Trading Implications

The combination of firm biodiesel demand, tighter Asian export availability and weather‑linked production risks argues for a cautiously bullish near‑term stance on palm oil. However, the relatively flat backwardation and elevated absolute price level suggest upside may be more incremental than explosive, with macro‑driven demand shocks (energy prices, economic slowdown) representing the main downside risks.

🔎 Trading outlook (next 1–3 months)

• Producers / sellers: Use current strength above EUR 940–960/t (MDEX front months) to extend forward hedging into late‑2026, especially for volumes exposed to Thai policy or weather risk. Retain some unhedged exposure for potential weather‑driven rallies.
• Industrial buyers / refiners: Consider layering in coverage on Q3–Q4 2026 needs while the curve discount to nearby months remains modest. Focus on spreads versus soyoil and rapeseed oil; any sharp corrective move in competing oils could offer better palm oil entry levels.
• Speculative participants: Bias towards buying on dips rather than chasing breakouts, with tight risk management around policy headlines (Thailand, Indonesian levies) and monthly Malaysian stock reports, which may trigger short‑term volatility spikes.

📍 3‑Day Directional View (Key Exchanges, in EUR/t)

Market	Nearby Level (approx.)	3‑Day Bias	Comment
MDEX CPO (Malaysia)	~EUR 950/t	Slightly firmer	Supported by Thai export ban and tight stocks; watch for profit‑taking after recent gains.
FOB SE Asia refined	Low EUR 1,000s/t (implied)	Stable to firm	Policy‑driven supply constraints offset by price‑sensitive demand in India and China.
EU CIF ports (palm olein)	~EUR 1,050–1,080/t (implied)	Stable	Influenced by energy prices and biofuel mandates; tracking SE Asian benchmarks with lag.

Overall, palm oil remains underpinned by structurally stronger biofuel demand and tightening Asian supply policies. Short‑term corrections are likely to be used as buying opportunities as long as Thailand’s export curbs and Southeast Asia’s energy and weather risks remain in play.