Palm Oil Market Analysis: Weakness in MDEX Amid Oversupply Concerns & Weather Risks

The palm oil market is facing renewed selling pressure as contracts across the Malaysian Derivatives Exchange (MDEX) saw notable declines. Market sentiment has turned defensive, with active contracts settling lower amid concerns over ample supplies, sluggish export demand, and persistent macroeconomic uncertainty in key purchasing countries. Seasonal factors—such as the cyclical increase in Southeast Asian palm oil production—combine with global edible oil competition to dampen upward price momentum. Traders are weighing recent floods and erratic rainfall across producing nations, as global weather disruptions may yet threaten longer-term yield potential, but so far, abundant output and subdued buying have shaped market direction.

Recent USDA and MPOB data indicate robust inventories, while India and China—major importers—are maintaining cautious approaches due to ample domestic stocks and currency instability. CBOT soyoil prices have also exerted downward pressure on palm oil, given their role as key edible oil benchmarks. Speculative traders are reducing net long positions, reflecting concerns of extended oversupply and tepid demand. The upcoming months will be crucial, with a keen focus on weather conditions in Malaysia and Indonesia, the world’s largest producers. Traders and market participants should be alert to changing weather forecasts, shipping trends, and potential biodiesel policy shifts as important price drivers for Q3–Q4 2025.

📈 Palm Oil Prices: Latest MDEX Futures (Malaysian Ringgit per tonne)

Contract	Close (MYR/t)	Change	Change (%)	Sentiment
Jul 2025	3,995	-37	-0.93%	Bearish
Aug 2025	4,053	-31	-0.76%	Bearish
Sep 2025	4,062	-29	-0.71%	Bearish
Oct 2025	4,064	-28	-0.69%	Bearish
Nov 2025	4,065	-25	-0.62%	Bearish
Dec 2025	4,072	-23	-0.56%	Bearish

🌍 Supply & Demand Drivers

• Latest MPOB data: Malaysian palm oil stocks remain elevated following a strong seasonal output increase.
• Indonesia’s production continues at high rates, with expectations for 2024/25 crops to surpass prior years, especially as rainfall patterns normalise.
• Indian and Chinese import demand is soft as buyers draw down existing inventories and contend with currency volatility.
• Global competition from soyoil and sunflower oil continues to limit palm’s price upside, especially as South American harvests increase available edible oil supplies.

📊 Fundamentals & Market Drivers

• USDA’s latest Oilseeds report projects global ending stocks for palm oil to rise modestly as production outpaces demand growth.
• Biodiesel mandates in Indonesia and Malaysia may offer price support, but are not enough to offset export demand weakness.
• Managed money entities have trimmed net long positions on MDEX, signalling persistent bearish sentiment among speculative funds.

☁️ Weather Outlook for Top Producers

• Malaysia & Indonesia: Recent weather reports indicate mostly normal rainfall, but some areas have experienced localised flooding, which could cap yield increases in affected plantations.
• Forward outlook: Seasonally strong rainfall expected in July–August could spur further output but also raise flood risk.
• Potential risks: Updates in the next 6 weeks—particularly disruptions from El Niño developments—could dramatically alter production dynamics. Monitor for unusual dryness or storms during the monsoon period.

🌐 Global Production & Stock Comparison

Country	2023/24 Production (MMT)	2023/24 Stocks (MMT)
Indonesia	48.0	4.5
Malaysia	19.2	2.1
Thailand	3.3	0.4
India	0.4	1.0 (import stocks)
China	0.0	0.6 (import stocks)

📆 Trading Outlook & Strategy

• Downside risks prevail near-term; holders should consider hedging strategies to protect against further declines.
• Physical buyers may find selective value in forward contracts, especially should weather uncertainties rise.
• Speculators: maintain a cautious approach—the market remains sensitive to both macro shocks and weather headlines.
• Pay close attention to monthly export figures and South American soyoil price movements as key market signals.

⏳ 3-Day Price Forecast (MDEX, MYR/t)

Date	Spot Contract (Aug 2025)	Market Bias
July 5	4,045	Weakness persists
July 6	4,035	Bearish consolidation
July 7	4,030	Choppy, risk of further losses