MDEX palm oil futures edge higher along the forward curve as El Niño, Indonesian biodiesel demand and vegoil spreads support prices. Short-term outlook mixed.
Prices & Term Structure
The MDEX crude palm oil curve on 30 September 2026 shows:
- Nearby Oct 26 at 4,430 MYR/t, slightly below the prior close (-3 MYR, -0.07%).
- Front liquid months firming: Nov 26 at 4,538 MYR/t (+0.33%), Dec 26 at 4,643 MYR/t (+0.41%).
- Q1–Q2 2027 moving higher: Jan 27 at 4,753 MYR/t, Feb 27 at 4,855 MYR/t, Mar 27 at 4,950 MYR/t, May 27 at 5,065 MYR/t.
- Curve peaks around mid-2027 (Jun 27 at 5,069 MYR/t) before easing slightly into late 2027 (Sep 27 at 4,916 MYR/t).
- Far-out 2028–2029 contracts are thinly traded but cluster just below 4,900 MYR/t with minimal day-on-day moves.
This structure reflects a mild backwardation from mid-2027 into late-2027/2028 after a pronounced upslope from nearby months, consistent with expectations of tighter supplies in 2027 but some normalization further out.
| Contract | Close (MYR/t) | D/D Change | Comment |
|---|---|---|---|
| Oct 26 | 4,430 | -3 (-0.07%) | Nearby, slight softness |
| Nov 26 | 4,538 | +15 (+0.33%) | Front month firm |
| Jan 27 | 4,753 | +22 (+0.46%) | Q1 2027 risk premium |
| Mar 27 | 4,950 | +24 (+0.48%) | Upward trend continues |
| May 27 | 5,065 | +25 (+0.49%) | Curve near short-term high |
Supply, Demand & Weather Drivers
On the supply side, strong El Niño conditions are already delivering much drier-than-normal weather across large parts of Indonesia’s palm belt, raising fire risk and pointing to yield stress that will more fully materialise in 2027 due to the lagged impact on fresh fruit bunches. Indonesian climate bulletins confirm strongly positive Niño3.4 anomalies, reinforcing expectations of continued dryness.
Malaysia’s situation is more nuanced: some forecasters note below- to near-normal rainfall for parts of the country, but inter-monsoon thunderstorms between September and November could partially offset El Niño dryness. This explains why the curve prices a risk premium into 2027 without a sharp spike in nearby contracts: current output is only modestly affected, while the bigger risk lies ahead.
On demand, Indonesia’s B50 biodiesel mandate, fully in effect from Q4 2026 after the transition from B40, is expected to absorb a large share of domestic CPO production, tightening export availabilities and structurally supporting prices. At the same time, global vegetable oil markets remain firm, with CBOT soybean oil futures holding at elevated levels, providing a supportive floor to palm oil via inter-commodity spreads.
Fundamentals & Positioning
The steady day-on-day gains from Nov 26 through mid-2027, despite only marginal moves in the nearby contract, suggest ongoing forward hedging by crushers and biodiesel players, as well as speculative length positioning further out the curve. The aggregate daily volume of nearly 20,000 lots underscores robust participation across the strip.
Fundamentally, key themes are:
- Production risk lag: Historical experience indicates that severe El Niño episodes cut yields primarily with a 6–12 month delay, concentrating downside risk in 2027 rather than late 2026.
- Biofuel pull: Indonesian B50 demand, estimated in earlier analyses to consume more than a third of Indonesia’s CPO output, limits exportable surplus and tightens the global S&D balance.
- Vegoil complex: While soybean oil has seen bouts of policy-driven volatility, current pricing remains historically high, supporting relative value for palm oil.
Weather Outlook for Key Regions
Regional climate centres continue to flag a strong El Niño with below-normal rainfall risks for much of the southern ASEAN region, including Indonesia’s major palm areas, into October. Indonesian forecasts emphasise persistently dry atmospheric conditions, elevated fire risk and limited soil moisture recharge, all negative for oil palm trees’ medium-term productivity.
For Malaysia, the end of the Southwest Monsoon and onset of the inter-monsoon period bring expectations of increased showers in some peninsular and Bornean regions, which could temporarily ease stress. However, authorities stress that rainfall between September and November will be critical in determining how severe the El Niño impact on 2027 palm oil output will eventually be.
Trading Outlook & 3-Day Direction
Strategic takeaways for market participants:
- Producers: Use current strength in Q1–Q2 2027 contracts near 4,750–5,050 MYR/t to layer in forward hedges, while retaining some upside exposure in case El Niño-driven production losses in 2027 exceed current expectations.
- Importers/Consumers: Consider bringing forward coverage for H1 2027 needs as the curve remains upward sloping into mid-2027, and weather and biodiesel risks are skewed to tighter balances rather than surplus.
- Speculators: The modest softness in Oct 26 versus firm gains further out suggests relative value in curve trades (long nearby vs short mid-2027) for those expecting some weather improvement or demand rationing.
3-day directional outlook (MDEX): With El Niño risks firmly on the radar and supportive biodiesel demand, but after a recent run-up in mid-curve contracts, we expect:
- Nearby Oct/Nov 26: sideways to slightly firmer, with dips likely supported by buying interest.
- Q1–Q2 2027 (Jan–Jun 27): consolidation at elevated levels; brief corrections possible but underlying uptrend intact.
- Late 2027/2028 strip: low liquidity suggests a stable but reactive tone, following signals from nearer contracts and fresh weather news.