Palm Oil Futures Ease From Highs as Stocks Edge Up and Biodiesel Demand Stays Firm

Palm oil futures have eased modestly from recent highs, with the MDEX forward curve for May 2026–May 2027 slipping around 0.5–0.8% on May 8 while remaining historically elevated. Rising Malaysian stocks and profit-taking are weighing on prices, but strong biodiesel demand and constrained supply growth in Southeast Asia keep the medium-term tone underpinned.

Benchmark crude palm oil (CPO) contracts on Bursa Malaysia Derivatives closed lower on May 8, in line with the gradual softening seen across the MDEX strip. Nearby May 2026 MDEX futures settled at MYR 4,478/t, down MYR 13 day-on-day, with similar declines across deferred contracts. At the same time, fresh MPOB data for April show Malaysian palm oil stocks nudging up to 2.30 million tonnes, while biodiesel and oleochemical exports remain very strong, confirming that food and fuel demand is absorbing supply despite higher stocks. Structural support from Indonesia’s higher biodiesel blending and limited land expansion in both Indonesia and Malaysia caps downside for the complex even as prices consolidate.

Prices & Curve Structure

The MDEX palm oil futures curve dated May 8, 2026 shows a mild downward correction but still reflects tight underlying fundamentals. Front-month and nearby contracts trimmed gains but remain clustered just below MYR 4,600/t.

*EUR conversion assumes ~5.22 MYR/EUR; values are indicative.

The curve is only slightly downward-sloping from mid-2026 into 2027/28, with later-dated notional prices implied around MYR 4,425/t (≈ EUR 848/t). This suggests the market is pricing in some normalisation of stocks but still expects structurally tighter balances than pre-2020, in line with the view that Indonesia’s biodiesel push and limited acreage growth restrict long-run supply growth. Bursa CPO futures on May 8 mirrored this softening, with May 2026 down to MYR 4,478/t, confirming that MDEX pricing is well aligned with the main reference contract.

Supply & Demand Drivers

Fresh Malaysian data point to a modest loosening but not an outright surplus. MPOB reported that total palm oil stocks rose 1.71% month-on-month in April to 2.30 million tonnes, driven mainly by higher production and a slower export pace earlier in the month. Nevertheless, downstream demand remains robust: oleochemical exports jumped nearly 24% month-on-month, while biodiesel exports almost tripled, underscoring the growing importance of industrial and energy uses in absorbing supply.

Regionally, Indonesia’s aggressive biodiesel mandate remains the key swing factor for export availability. Market intelligence indicates that full-year biodiesel feedstock needs could reach around 15 million tonnes of palm oil equivalent in 2026, significantly reducing exportable CPO and refined palm products. With Malaysia’s own biodiesel blending and limited room for new plantations, Southeast Asia as a whole is increasingly prioritising domestic fuel security over exports. This helps explain why prices can ease on short-term data such as higher stocks and profit-taking but still hold at historically firm levels.

Fundamentals & Macro Linkages

Beyond the immediate supply-demand balance, several structural factors continue to support palm oil fundamentals. Global edible oil markets are tight: edible oil prices have outpaced broader food commodities since 2019, supported by both food consumption and a rapid rise in biofuel mandates that now absorb more than a fifth of edible oil output. In 2026, competing oils are also heavily drawn into biofuels, notably soybean oil in the Americas, reinforcing palm oil’s role as a relatively cost-effective alternative for food and industrial users.

On the supply side, Malaysia’s crude palm oil production in 2026 is expected to moderate from the record levels of 2025, reflecting biological yield cycles and chronic labour constraints in plantations. Indonesia faces similar structural limits on expanding acreage, while plantation age profiles and sustainability rules slow greenfield development. Together with rising domestic biodiesel allocations, these constraints suggest that any demand surprise—whether from higher biodiesel blends, stronger emerging market food demand, or a crude oil rally—could quickly tighten balances and push the MDEX curve back toward recent highs.

Weather & Short-Term Risks

Current weather across key Southeast Asian palm belt regions is broadly seasonally normal, with scattered showers in Peninsular Malaysia and Sumatra helping maintain soil moisture but not yet indicating a clear shift into either strong yield-boosting or drought conditions (recent regional meteorological summaries, May 9–11). While no acute weather shock is priced in at present, plantation yields remain sensitive to any renewed heat or drier-than-normal pattern later in Q2–Q3, particularly if coinciding with the typical low-production window.

Near-term price risk therefore looks more macro- and policy-driven than weather-driven. Geopolitical developments that affect crude oil prices, as well as any change in biodiesel mandates or export levies, could quickly alter the POGO (palm oil–gasoil) spread and shift discretionary biodiesel demand. Some of the latest price softening has also been linked to improving sentiment around peace talks in conflict regions, which eased risk premia across energy and commodities.

Market Outlook & Trading Guidance

With MDEX futures consolidating just below MYR 4,500–4,550/t (≈ EUR 860–870/t) across 2026–2027 deliveries, the market appears to be in a range-trading phase after a strong run-up since late February, which earlier saw prices gain around 15%. The modest April stock build and slightly softer nearby prices argue against aggressive new longs at current levels, but strong biodiesel pull and constrained supply cap downside barring a major macro shock.

Focused Trading Recommendations

• Procurement hedging: Food and oleochemical buyers with uncovered Q3–Q4 2026 needs may consider layering in coverage on dips toward the lower end of the recent range, given still-tight structural balances and the risk of renewed energy-led rallies.
• Producers and crushers: Use current backwardation lightening (nearby slightly softer than deferred) to secure forward selling for 2027 at still-attractive EUR-equivalent prices, while retaining some upside via options given policy and weather uncertainties.
• Speculative participants: Short-term strategies may focus on range-trading with tight risk controls, selling rallies into MYR 4,650–4,750/t (≈ EUR 890–910/t) resistance and covering on pullbacks near MYR 4,350–4,400/t (≈ EUR 830–842/t), as long as Malaysian stocks continue to grind higher and macro sentiment stays cautious.

🔭 3-Day Directional Price Indication (EUR)

• MDEX CPO (nearby, May–June 2026): Slightly softer to sideways in EUR terms, with an expected range around EUR 840–870/t as the market digests the latest Malaysian stock increase.
• Deferred MDEX (Q1–Q2 2027 deliveries): Broadly stable near EUR 850–865/t, reflecting expectations of only gradual stock rebuilding and persistent biodiesel-driven support.
• Risk bias: Short-term bias modestly downward on technical consolidation, but medium-term risk skewed to the upside on any renewed crude oil strength or weather disruptions in Southeast Asia.