Palm Oil Market: Price Decline Eases Amid Weather Uncertainty and Lower EU Imports

The palm oil market has recently exhibited notable signs of stabilisation, following extended declines earlier in the month. Despite seasonal headwinds and macro uncertainties, Malaysian palm oil futures have managed to close slightly higher, tracking gains in competing oils, particularly soybean oil on the Chicago Board of Trade. While short-term sentiment remains cautious due to subdued export demand and persistent questions surrounding the health of top-producing regions’ yields, several fundamental shifts are offering new opportunities and risks for traders and processors alike.

This week, spot contracts on the Bursa Malaysia Derivatives Exchange (MDEX) displayed limited volatility, with most front-month contracts recording modest daily losses, while later maturities rebounded. The focal point lies in weaker EU import demand—recorded at 93,234 tonnes, a steep 53% drop from last year—raising questions about structural changes in global consumption. Meanwhile, attention is fixed on Southeast Asian weather forecasts as analysts debate whether recent mild conditions may soon give way to adverse impacts of El Niño, potentially tightening supply later in the season.

Fundamentally, global vegetable oil markets are closely monitoring Malaysian and Indonesian output recoveries, inventory movements, and speculative positioning, all while biofuel demand and regulatory shifts loom. Against this backdrop, this detailed analysis explores current price levels, supply and demand dynamics, prevailing fundamentals, and offers a forward-looking outlook for key market participants.

📈 Prices: Recent Developments and Exchange Data

Contract Month	Closing Price (MYR/t)	Change (MYR)	Change (%)	Sentiment
Aug 25	4,236	-8	-0.19%	Neutral/Bearish
Sep 25	4,280	-18	-0.42%	Bearish
Oct 25	4,300	-15	-0.35%	Bearish
Nov 25	4,305	-15	-0.35%	Bearish
Dec 25	4,303	-14	-0.33%	Bearish
Jan 26	4,298	-15	-0.35%	Bearish
Feb 26	4,287	-11	-0.26%	Slightly Bearish
Mar 26	4,266	-10	-0.23%	Slightly Bearish
Apr 26	4,226	-16	-0.38%	Bearish
May 26	4,190	-17	-0.41%	Bearish
Jun 26	4,182	0	0.00%	Stable
Jul 26	4,160	-11	-0.26%	Slightly Bearish

Market Note: Front months remain pressured by ongoing weak demand, particularly from Europe, and seasonally improved production estimates in Malaysia.

🌍 Supply & Demand: What’s Moving the Market?

• EU Imports: Latest figures at 93,234 tonnes mark a 53% YoY decline, signaling weaker European demand linked to policy, sustainability initiatives, and competitive oils.
• Malaysia/Indonesia Production: Recovering yields post-weather disruptions, but risks of poor monsoon or El Niño remain.
• India/China Demand: Import pace lags; Indian buyers increasingly turn to sunflower and soybean oil amid attractive price differentials.
• Biofuels: Ongoing policy adjustments across major consuming regions (EU, Indonesia) add uncertainty to consumption outlook.

📊 Fundamentals: Global Market Context

• Global Inventories: Ending stocks for palm oil in Malaysia are currently trending near 1.8 million tonnes—a moderate buffer, but below five-year averages for this period.
• Speculative Positioning: Hedge funds/managed money maintain net short positions, reflecting broader caution.
• Price Relationships: The spread between palm oil and soybean oil narrowed in recent sessions, supporting some buying interest in palm oil at these levels.
• External Drivers: Currency volatility (especially USD/MYR and EUR/MYR) and ongoing freight/logistics disruptions impact realized prices for international buyers.

🌦️ Weather Outlook and Yield Analysis

• Southeast Asia: Current forecasts indicate mostly normal rainfall in Malaysia/Indonesia, with patchy concerns about dryness in parts of Sumatra and Borneo. Short-term mild weather aids output, but El Niño risk lingers for later in the year.
• India: Monsoon patterns broadly supportive, but southern regions face patchy deficits. No immediate threat to downstream importers.
• Agronomic Impact: If current trends persist, Q3 palm oil yields should remain stable to slightly higher. Major weather-driven price disruption risk is moderate in the near term.

🌐 Global Production and Stocks Comparison

Country	2024 Est. Production (mn t)	2024 Ending Stocks (mn t)
Indonesia	48.5	3.8
Malaysia	19.0	1.8
Thailand	3.3	0.2
India	0.6	0.3
China	0.5	0.2
EU-27 (Import)	–	0.5

Note: Indonesia and Malaysia dominate both production and stockholding, setting global price tone.

📌 Trading Outlook & Recommendations

• Short-term bias remains cautious; gains capped by weak EU/India import pace and ample competing oil supply.
• Buyers: Consider incremental coverage for Q3/Q4 amid price stabilization, but monitor monsoon and El Niño developments closely.
• Producers: Favor forward sales for deferred months due to ongoing price risks from EU demand and weather volatility.
• Speculators: Maintain nimble, rangebound strategies as major directional catalysts are limited in the near term.
• Monitor currency movements—MYR weakness could support local prices even if global benchmarks soften further.

📆 3-Day Regional Price Forecast (MDEX, MYR/t)

Date	Front Month Estimate	Sentiment
Day 1	4,220 – 4,260	Stable to Slightly Bearish
Day 2	4,210 – 4,250	Cautious Consolidation
Day 3	4,200 – 4,240	Consolidation, Weather Watch