Palm oil futures firm along the curve as fundamentals stay cautiously supportive

MDEX palm oil futures extended their recent rebound on 26 May, with the entire actively traded curve closing modestly higher and the nearby Jun–Nov 2026 contracts up around 0.4–0.9%. The structure remains slightly upward sloping into early 2027, signalling a market that is firm but not in acute shortage.

Recent price gains come after a brief correction linked to weaker export data and softer crude oil, but sentiment has turned more constructive as energy markets stabilise and biodiesel demand expectations firm. At the same time, analysts highlight that inventories in Malaysia and Indonesia are elevated, limiting the upside and keeping volatility high. Weather conditions in key Southeast Asian producing regions are currently mixed but without major new disruptions. Overall, palm oil is trading in a range-bound but supported environment where macro and policy headlines can quickly shift momentum.

Prices & Curve Structure

On 26 May 2026, MDEX palm oil futures settled higher across all listed maturities. The Jun 2026 contract closed at 4,429 MYR/t, up 19 MYR (+0.43%) on the day, while Aug 2026 – the current benchmark on Bursa Malaysia – finished at 4,496 MYR/t, gaining 23 MYR (+0.51%). Further out, Nov 2026 settled at 4,581 MYR/t (+0.81%).

The curve shows a mild contango from Jun through early 2027, with front-month levels around 4,400–4,600 MYR/t and peak prices of just above 4,630 MYR/t in Jan–Feb 2027. Activity remains concentrated in the Aug 2026 contract, which traded over 23,000 lots, indicating that liquidity and price discovery are focused on the mid-curve. Later-dated expiries into 2028–2029 are largely symbolic, with no volume and marked around 4,481 MYR/t.

(EUR values approximated using an indicative rate of 1 EUR ≈ 5.12 MYR.)

Supply, Demand & External Drivers

Short-term price direction remains heavily influenced by export flows and energy markets. Late last week, Malaysian palm oil futures had come under pressure after cargo surveyors reported May exports down roughly 14–21% versus April and as Brent and WTI corrected lower, weakening the biodiesel economics that normally underpin palm oil demand.

Since then, a rebound in crude oil and some short-covering has supported a recovery in palm prices, with regional reports on 27 May flagging a notable jump in Bursa Malaysia CPO contracts on 26 May driven by stronger energy markets. Medium term, demand signals are mixed: India’s palm oil imports so far in the 2025/26 marketing year are significantly higher year-on-year, while China is still running above-average stocks, tempering incremental buying interest.

On the supply side, both Malaysia and Indonesia enter mid-2026 with structurally adequate production and, according to analysts, palm oil inventories in Malaysia are hovering near multi-year highs after several months of stock builds. This caps sustained rallies unless there is a fresh production shock or policy-driven disruption, such as Indonesia’s ongoing export reforms, which have introduced bouts of volatility but not yet a prolonged supply squeeze.

Weather & Production Outlook

Weather risk remains a key theme for 2026. Sector guidance at the start of the year highlighted elevated climate uncertainty, with expectations of slightly wetter-than-usual conditions and localised flooding risk in parts of Malaysia and Indonesia. Earlier in March, heavy rains and flooding in Sabah contributed to one of Malaysia’s sharpest monthly output drops in over a year, underscoring the market’s sensitivity to regional weather extremes.

More recently, meteorological updates for Indonesia point to a transition-phase pattern, with scattered heavy rainfall and strong winds in some areas but no immediate indication of a new, large-scale disruption in the core palm belts. For now, plantation analysts remain cautiously optimistic that 2026 production will be stable to slightly higher year-on-year, supported by replanting and productivity efforts, but they emphasise that any renewed flooding or extreme dry spells could quickly tighten fundamentals.

Market Sentiment & Fundamentals

The current futures curve configuration – modest contango with steady price increments from mid-2026 into early 2027 – reflects a balance between ample nearby stocks and expectations for continued demand growth, particularly from the biofuel segment. Indonesia’s planned roll-out of a B50 mandate and Malaysia’s move toward B15 are both medium-term supportive for structural consumption of palm-based biodiesel, even if the precise timing and pace of implementation remain key uncertainties for traders.

At the same time, the link between palm oil and broader energy markets is reasserting itself: recent volatility in crude oil has translated into rapid swings in CPO via the biodiesel channel and the general risk appetite for commodities. With Malaysian inventories comparatively high and export trends uneven, speculative length remains sensitive to macro headlines and relative value versus competing soft oils such as soybean and sunflower oil.

Trading Outlook & 3‑Day View

Trading considerations (next 1–2 weeks)

• Producers / sellers: Current MDEX levels around 4,450–4,600 MYR/t (≈870–900 EUR/t) offer reasonable hedging opportunities for Q3–Q4 2026 shipments, especially given high stock levels and lingering downside risk from weaker exports.
• Consumers / refiners: Consider a staggered buying strategy on dips rather than chasing the latest rebound, focusing on Aug–Nov 2026 where liquidity is highest and spreads are relatively shallow.
• Speculative participants: Short-term bias is mildly constructive but vulnerable to macro pullbacks; relative value trades versus soybean oil or calendar spreads (e.g., Aug/Nov) may offer better risk-reward than outright directional exposure.

3‑day directional indication (Bursa / MDEX)

• MDEX front month (Jun 2026): Slightly upward to sideways – recent gains may extend if crude oil holds, but nearby resistance around the high 4,400s MYR/t could cap moves.
• Benchmark Aug 2026: Bias to trade in a 4,400–4,550 MYR/t band (≈860–890 EUR/t), with intraday volatility driven by export survey updates and energy price swings.
• Late 2026 / early 2027 contracts: Likely to track front-month direction with lower amplitude, remaining in modest contango unless a fresh supply or policy shock materialises.