Palm Oil Curve Softens Slightly as Weather Risks Loom Over 2026 Supply

MDEX palm oil futures are seeing a modest pullback after yesterday’s rally, with the curve still relatively firm into 2027 while looming El Niño risks and cost inflation keep the medium‑term supply outlook tight.

After a strong upward move on May 5, today’s trading shows light corrective pressure across 2026 contracts and thin liquidity beyond 2027, suggesting a pause rather than a trend reversal as the market reassesses weather and macro signals.

📈 Prices & Curve Structure

The MDEX palm oil curve on 6 May 2026 is drifting slightly lower across actively traded 2026–27 contracts. Front 2026 positions are off around 0.3–0.5% day‑on‑day, consolidating just below the recent highs above MYR 4,600/t seen on 5 May, when nearby contracts gained roughly 0.8–0.9% and the curve remained moderately backwardated into 2027.

Contract (MDEX)	Last close (MYR/t)	D / D %	Approx. EUR/t*
May 2026	4,630	-0.26%	≈ 890
June 2026	4,659	-0.47%	≈ 895
July 2026	4,690	-0.43%	≈ 900
August 2026	4,701	-0.43%	≈ 902

*EUR conversion assumes ~MYR 5.20 = EUR 1, indicative only.

The nearby part of the curve (May–Nov 2026) is clustered around MYR 4,630–4,705/t with small daily losses, while 2027 contracts remain slightly lower and less liquid, preserving a mild backwardation that still reflects tighter perceived balances in the short to medium term rather than in the distant tail. Activity is concentrated in July and August 2026, underlining trade focus on the upcoming peak production window.

🌍 Supply, Demand & Weather Risks

Fundamentally, palm oil is trading against a backdrop of expected lower stock growth in Southeast Asia and tightness across the global vegetable oil complex, even as very short‑term price moves remain sensitive to competing oils and currency moves. Recent analysis points to a credible downside risk of up to 2 million tonnes in Indonesia’s 2026 output, driven by looming El Niño conditions and elevated fertiliser costs that threaten yields, especially among smallholders.

Climate agencies and regional media now flag a high probability that El Niño will emerge between May and July 2026, raising the risk of hotter, drier conditions in key palm regions of Indonesia and Malaysia later this year. Historically, such patterns can trim yields with a lag, affecting late‑2026 and 2027 production. At the same time, global macro sentiment and rival oil markets (soyoil, sunoil) continue to steer short‑term price swings, limiting immediate upside despite the weather premium building into forward expectations.

🌦️ Weather outlook (key regions)

• Malaysia & Indonesia: Transition from La Niña towards likely El Niño in the May–July window, with increased odds of below‑normal rainfall and above‑normal temperatures through H2 2026, particularly in Sumatra and Kalimantan.
• Market impact: Near‑term field conditions remain manageable, but any prolonged dryness over the next 3–6 months could tighten 2026/27 exportable surpluses and support prices, especially in EUR‑denominated import markets.

📊 Market Fundamentals & Sentiment

Market sentiment on MDEX remains cautiously constructive. Recent sessions showed that prices can hold above MYR 4,600/t when supported by firmer soybean oil and expectations of lower palm stocks, though a stronger ringgit and softer Chicago soyoil have temporarily capped gains and triggered the latest mild correction. The moderate backwardation into 2027 signals that commercial participants still anticipate relatively tighter nearby balances than in the longer term, consistent with weather and cost risks concentrated in the next 12–18 months.

On the policy and hedging side, Bursa Malaysia’s ongoing product development, including a more flexible US‑dollar‑denominated palm olein futures contract, is gradually broadening access for refiners and international traders, potentially increasing liquidity and improving price discovery for European buyers over time. However, today’s raw price action is dominated more by fundamentals and cross‑commodity flows than by structural market changes.

📆 Trading Outlook (Short-Term)

• Importers / Consumers (EU refiners, food & biofuel): Use the current dip below the recent highs to cover part of Q3–Q4 2026 needs in EUR, taking advantage of the modest pullback but staggering purchases in tranches given high weather uncertainty.
• Producers / Sellers (Malaysia, Indonesia): Maintain disciplined forward hedging on rallies above the MYR 4,700/t area for 2026 shipment, while keeping some volume unpriced to benefit if El Niño materially tightens supply into late 2026.
• Speculators: Short‑term momentum has turned neutral to slightly negative; consider buying on further dips towards the MYR 4,500–4,550/t zone, with tight risk limits, to position for renewed weather‑driven strength into H2 2026.

📍 3‑Day Directional Price Indication (EUR terms)

• MDEX front‑month CPO (Malaysia): Slightly bearish to sideways over the next 3 trading days, with prices likely oscillating around the equivalent of EUR 880–900/t as the market digests macro cues and early weather headlines.
• EU landed CPO / palm olein values: Expected largely steady in EUR, with minor downside from futures weakness offset by firm freight and lingering concerns over Q4 2026 supply risks.