Palm Oil Market Rises: Bullish Sentiment as Prices Firm, Supply Uncertainties Loom

The palm oil market enters a period of renewed optimism as futures prices surge, supported by tightening global vegetable oil supplies and positive macro trends. On the Bursa Malaysia Derivatives Exchange, palm oil contracts across maturities have edged higher, reversing recent declines. This bullish mood is notably visible with the February 2026 contract closing at MYR 4,094/tonne. Multiple factors, including steady biodiesel demand, a wave of speculative interest, and regulatory changes in the EU oilseeds sector, drive the current uptrend. However, volatility remains elevated due to competitive pressures from soyoil and uncertain weather forecasts for Southeast Asia—crucial for production outlooks in the world’s top growers: Indonesia and Malaysia.

Recent data highlights robust processing margins for soyoil, as shown in North America’s latest NASS Fats & Oils Reports. This boosts overall demand for vegetable oils, indirectly supporting palm oil prices. Additionally, the introduction of new EU biofuel regulations is expected to shift demand dynamics for rapeseed and palm products, but practical impacts are only foreseen for 2027 onwards. Short-term price movements are therefore governed by South East Asian weather, palm oil production updates, and commodity fund activity. With export demand from India and China showing resilience and weather risks building, traders are advised to stay nimble while keeping a close watch on supply chain developments. The following report delves into the price trends, supply & demand forces, key regulatory changes, and forecasts to guide traders and stakeholders through the evolving palm oil landscape.

📈 Prices: Latest Palm Oil Futures on Bursa Malaysia (MYR/t)

Contract	Prev. Close	Open	High	Low	Close	Change	Change (%)	Volume	Sentiment
Dec 25	4000.00	4050.00	4050.00	4050.00	4050.00	+50.00	+1.23%	5	Neutral-Firm
Jan 26	4041.00	4045.00	4091.00	4045.00	4067.00	+26.00	+0.64%	1281	Bullish
Feb 26	4063.00	4067.00	4115.00	4064.00	4094.00	+31.00	+0.76%	7169	Bullish
Mar 26	4082.00	4083.00	4132.00	4083.00	4109.00	+27.00	+0.66%	4542	Bullish
Apr 26	4093.00	4099.00	4140.00	4092.00	4117.00	+24.00	+0.58%	1993	Bullish

Spot and near-term prices show solid gains, driven by demand and perceived supply risks.

🌍 Supply & Demand Drivers

• Rising Global Demand: India and China continue to show strong import demand, especially ahead of festival seasons.
• Competing Oils: Soyoil and sunflower oil markets remain firm; weather issues in South America may further limit rival oil exports, favoring palm oil.
• Biodiesel Policy Changes: New EU regulations (THG-Quotengesetz, Germany) and updated biofuel quotas will provide medium-term demand support for vegetable oils, especially from 2027.
• Speculative Activity: Rising net long positions in related oilseeds and vegetable oils (notably US soy complex) support global edible oil prices in the short term.
• Production Uncertainties: Seasonal monsoon rains in Malaysia and Indonesia create some concern about delayed harvests and export flows.

📊 Key Fundamentals

• UBS Palm Oil Production: Malaysia production for 2025/26 is forecast at 19.8 million tonnes, with Indonesia at 48.6 million tonnes; however, yield estimates are at risk from erratic rains and potential El Niño impacts.
• Global Ending Stocks: Ending stocks projected to be slightly lower year-on-year due to robust demand and challenging growing conditions.
• Export & Import Patterns: Key importers (India, China, EU) maintain a steady intake, with recent trade data pointing to rising Indian purchases in Q4/2025.
• Fund Positioning: Bullish speculative positions persist across the edible oil complex, as evidenced by US CFTC data in soybeans and anticipated spillover into palm oil.

☀️ Weather Outlook: Malaysia & Indonesia

• Malaysia: Heavy and uneven rainfall is expected in major growing regions (Johor, Sabah) through mid-December, risking harvest delays and transport disruptions.
• Indonesia: Mixed outlook with some areas in Sumatra and Kalimantan seeing above-average rain, which could affect extraction rates but also aid longer-term yields. El Niño effects are being monitored closely.
• Potential Impact: Short-term delays could tighten local supplies and firm prices, but any sustained improvement in weather may ease tightness by late January.

🌐 Global Production & Stocks Comparison (2025/26, Estimates)

Country	Production (Mt)	Ending Stocks (Mt)	Comment
Indonesia	48.6	3.6	Largest producer, output at risk in some areas from heavy monsoon
Malaysia	19.8	2.1	Production growth moderate; weather key forward risk
Thailand	3.3	n/a	Stable output
India	0.7	0.2	Low domestic output, high dependence on imports
China	0.8	0.5	Key importer; stocks stable
EU	0.6	0.5	Stocks to rise with new biofuel policy from 2027

📆 Trading Outlook & Recommendations

• Short-term bias remains bullish, especially for Feb-Apr 2026 contracts—focus on supply risks and speculative inflows.
• Watch for further developments in EU/German biofuel policy as implementation details become clearer.
• Monitor South East Asian weather patterns—prolonged harvest disruptions may lead to further price spikes.
• Traders may consider carry trades on deferred contracts, as market structure suggests supply tightness in H1 2026.
• Bear in mind possible profit-taking and high volatility around major USDA/MPIC crop reports and monthly MPOB data.

🔮 3-Day Regional Price Forecast (Bursa Malaysia, MYR/t)

Date	Forecast Price Range (MYR/t)	Market Sentiment
Day 1	4090–4140	Bullish with upside risk on weather
Day 2	4105–4150	Volatile, weather-linked
Day 3	4100–4160	Firm to strong