Palm Oil Finds a Floor as Crude Recovers and Vegoil Complex Firms

Palm oil futures are stabilising after a short-lived dip to a two‑week low, with prices drawing support from a firmer crude oil market and rallying soybean oil. Weak near‑term demand from key buyers like India is capping the upside, but biofuel policy signals in the US and expectations for higher mandates beyond 2026 are lending a medium‑term floor.

After tracking the recent correction in crude and the reluctance of Indian refiners to chase high-priced supplies, palm oil briefly slipped, before rebounding on Thursday morning on the back of stronger soyoil in Chicago and a firming energy complex. At the same time, the forward curve on the Malaysian exchange and related vegetable oil markets suggests that biofuel demand and policy decisions (notably upcoming US EPA blending rules) remain crucial for price direction through 2026–2027.

📈 Prices & Market Structure

Malaysian palm oil futures on the domestic exchange declined to their lowest level in two weeks on Wednesday, pressured by softer crude oil and sluggish physical demand from major importers. The prompt contracts then recovered early Thursday as soyoil in Chicago rallied and crude oil turned firmer again. Nearby terms remain more expensive than the outer years, reflecting current tightness and risk premia from the Iran conflict, while 2027–2028 strips trade at a discount, signalling expectations for better supply and slower demand growth later in the decade.

Contract (FCPO)	Approx. level (MYR/t)	Change vs. prior day	Approx. EUR/t*
Nearby (Apr–Jun 2026)	≈ 4,500–4,600	+0.2% to +0.3%	≈ 880–900
Deferred (2027)	≈ 4,300–4,400	Mostly steady	≈ 840–860
Long-term (2028+)	≈ 4,200–4,300	Unchanged, illiquid	≈ 820–840

*EUR conversion based on ~5.1 MYR/EUR, indicative only.

🌍 Demand, Trade Flows & Macro Links

Demand from India is currently a key drag: several Indian edible oil refiners have scaled back purchases of palm, soybean and sunflower oil, betting that the price rally triggered by the Iran war will not be sustained. This pause in buying is curbing nearby export interest from Malaysia and Indonesia and contributed to the recent two‑week low in futures. A similar pattern is visible in other price‑sensitive markets, where buyers are rationing demand or delaying tenders until volatility in crude and freight eases.

Nevertheless, palm oil continues to benefit indirectly from strength in the wider vegetable oil complex. Soyoil in Chicago has risen sharply in recent sessions, underpinned by expectations that the US Environmental Protection Agency will tighten biodiesel and renewable diesel blending mandates for 2026–2027. Higher soyoil prices improve the relative competitiveness of palm oil, especially in markets where refiners can switch between feedstocks based on pricing spreads.

📊 Fundamentals & Policy Drivers

Underlying fundamentals remain broadly balanced but with notable policy‑driven upside risks. The US EPA is expected to publish updated biodiesel blending requirements for 2026 and 2027 within days, possibly ahead of a scheduled presidential meeting with farmers and industry representatives. Stronger‑than‑expected mandates would tighten global vegoil balances over the medium term, channel more demand into soyoil and used cooking oil, and by substitution raise the floor under palm oil values.

At the same time, the broader energy backdrop remains volatile. Oil prices spiked after the Iran conflict disrupted Middle East flows and then retreated as markets priced in possible de‑escalation and partial reopening of the Strait of Hormuz. Recent sessions show Brent and WTI pulling back from their highs but still trading at elevated levels, keeping biodiesel economics broadly supportive and encouraging mandates and discretionary blending to remain in focus for policymakers and refiners.

🌦️ Weather & Production Outlook

No acute weather shock is currently dominating the palm oil narrative, and recent price moves have been driven more by demand, policy and macro factors than by production losses. Seasonal output in Southeast Asia is in a relatively benign phase, and markets are more focused on how any future El Niño/La Niña developments could shape 2026–2027 yields rather than on immediate crop threats. For now, forward discounts for 2027–2028 suggest that traders assume broadly adequate supply once current geopolitical risk premia fade.

📆 Trading Outlook & Strategy

• Short-term (next days): Expect a choppy, range‑bound market, with nearby support from firmer soyoil and crude and resistance from weak Indian demand and macro uncertainty. Intraday direction will likely track Chicago soyoil and crude oil swings.
• Medium-term (into 2H26–2027): EPA’s biodiesel blending decision is the key event risk; a stronger mandate would be bullish for the entire vegoil complex and could flatten or even invert the currently discounted back months.
• Risk management: Importers may consider layering in coverage on price dips near the lower end of the recent range, while producers and crushers could use the slight recovery to extend hedges in the 2027 strip, where prices still embed a notable discount to nearby values.

📍 3‑Day Directional Price Indication (EUR)

• Bursa Malaysia FCPO (nearby, Apr–Jun 2026): Bias mildly firmer in EUR terms, tracking any further recovery in crude and soyoil; expected range roughly 860–910 EUR/t.
• Deferred FCPO (2027 strip): Likely to lag nearby gains; range‑bound with a modest upward bias around 830–870 EUR/t as biofuel news is digested.
• Physical CIF India West Coast: Spot demand remains soft; basis could weaken slightly against futures even if benchmark prices edge higher, maintaining a cautious tone among refiners.