Palm Oil Firms as War‑Driven Oil Shock Eases but Demand Signals Stay Mixed

Palm oil futures on the Malaysian exchange are recovering alongside a sharp pullback in crude oil, with the MDEX curve steepening moderately into late 2026–2027, signaling a firmer near-term tone but no runaway tightness. The broader vegoil complex remains split, however, as softer palm and soya oil in Asia contrast with stronger soyoil at the CBOT.

Recent sessions have seen crude oil prices fall by around 10–12% after the U.S. extended its ultimatum to Iran by five days and signaled active diplomacy, easing immediate fears around the Strait of Hormuz and energy infrastructure. This removes part of the war risk premium but leaves a fragile backdrop. At the same time, solid U.S. soybean exports and an only average harvest pace in Brazil underpin the oilseed complex, limiting downside for palm oil despite some holiday-thinned trading in Malaysia and weaker morning indications in Dalian.

📈 Prices & Curve Structure

The latest MDEX crude palm oil strip (settlement 19 March 2026) shows front contracts higher on the day and a gently declining curve into 2027–2028:

Contract	Close (MYR/t)	Change (MYR)	Change (%)
Apr 2026	4,580	+78	+1.70%
May 2026	4,619	+85	+1.84%
Jun 2026	4,611	+83	+1.80%
Nov 2026	4,454	+81	+1.82%
Mar 2027	4,410	+96	+2.18%
Nov 2027	4,266	+96	+2.25%

Using an approximate exchange rate of 1 EUR ≈ 5 MYR, nearby May 2026 futures around 4,619 MYR/t translate to roughly 924 EUR/t, while late‑2027 contracts near 4,266 MYR/t equate to about 853 EUR/t. The structure points to a modest backwardation, consistent with tighter nearby fundamentals relative to a more balanced longer-term outlook.

Notably, daily gains of around 1.7–2.2% across listed 2026–2027 contracts were achieved on a day when Malaysian palm oil trading had just resumed after a holiday and midday prices had been modestly lower. This intraday reversal underlines how quickly sentiment is tracking moves in the energy complex and in related vegoils.

🌍 Supply, Demand & Cross‑Market Drivers

The palm oil complex is currently being pulled between three key external forces: the Middle East war’s impact on crude oil, competitive pressure from soyoil, and shifting import demand patterns. After a holiday pause in Malaysia, palm oil slipped about 0.6% into the Tuesday midday break, with parallel weakness in palm and soya oil on China’s Dalian exchange. Soyoil on the CBOT, however, firmed in early U.S. trading, driven by robust soybean export data.

The USDA has reported weekly U.S. soybean export inspections of about 1.1 million tonnes, up 12% on the week and 32% year‑on‑year for the comparable week. China remains the dominant buyer, followed by Egypt and Japan. Cumulatively, U.S. soybean shipments since 1 September have reached roughly 29.2 million tonnes, still 27% below the previous year but clearly improving on a weekly basis. This combination of strong weekly flows and a lagging season-to-date total suggests importers are catching up, providing support to the broader oilseed complex and indirectly to palm oil.

On the supply side, Brazil’s 2025/26 soybean harvest is 68% complete, 8 percentage points ahead of the previous week but behind last year’s 80% at the same time. The slightly slower pace and ongoing logistical bottlenecks in Brazil can keep nearby soyoil availability tighter than usual, tempering the pressure on palm from alternative oils, especially in key Asian and African destinations.

📊 Macro & Energy Link: War Risk Premium in Retreat

The dominant macro factor for palm oil in recent weeks has been the war-driven surge in crude oil prices following the closure and disruption of the Strait of Hormuz. With around a fifth of global traded oil normally transiting this route, the conflict had propelled Brent and WTI to near USD 120 per barrel, pulling biofuel feedstocks and vegoils higher in tandem. As of 23–24 March, however, U.S. signals of diplomacy with Iran and a five‑day extension of the ultimatum have led to a sharp correction, with Brent dropping roughly 10–11% and WTI similarly lower as markets price a lower probability of immediate infrastructure strikes.

This retreat in crude has two opposing implications for palm oil. On the one hand, reduced energy prices ease cost pressure on consumers and may slightly dampen immediate biofuel demand support. On the other hand, a more stable macro backdrop tends to improve risk appetite and can support commodity index re‑engagement with agricultural markets, especially if traders view the correction as an opportunity rather than the end of the energy shock. For now, palm oil appears to be consolidating slightly below the recent highs implied by the earlier oil spike, with the MDEX curve anchoring nearby contracts close to 4,600 MYR/t.

⛅ Weather & Production Outlook

Weather remains a background factor rather than the primary driver in the very short term, as recent price moves have been dominated by geopolitics and energy markets. No major new weather shocks have been reported in the last few days for key Southeast Asian palm regions that would immediately alter near‑term output prospects. Seasonal production increases into Q2 are still anticipated, though the exact trajectory will depend on local rainfall and the lingering effects of earlier El Niño/La Niña phases.

In South America, relatively normal harvesting conditions in most Brazilian soybean regions, despite localized disruptions, support an overall solid oilseed supply picture for later in 2026. Any emerging dryness or excessive rains would matter more for forward palm oil price expectations via the soyoil channel than for the current nearby MDEX strip, which is already reflecting known harvest and export dynamics.

📆 Trading & Risk Management Outlook

• Nearby contracts (Apr–Jun 2026): With prices around 4,580–4,620 MYR/t (~916–924 EUR/t), nearby futures are supported by residual war risk and firm soyoil demand. Dips driven by further crude oil weakness toward pre‑crisis levels may offer hedging opportunities for physical buyers, provided the geopolitical situation does not deteriorate again.
• Forward curve (late‑2026 to 2027): The discount of around 200–300 MYR/t versus nearby months (≈40–60 EUR/t) suggests the market expects some normalization of fundamentals. Producers may consider layering in sales on rallies, especially if crude oil rebounds or if Dalian vegoils strengthen on renewed Chinese demand.
• Cross‑spread strategies: The divergence between weaker Asian palm/soya oil and stronger CBOT soyoil argues for close monitoring of palm‑soyoil spreads. Should U.S. export strength persist while Dalian stays soft, palm oil may need to reprice higher relative to soyoil to retain pricing leadership in some import markets.
• Geopolitical risk: Despite the recent easing in crude, any renewed escalation around the Strait of Hormuz, or actual damage to energy infrastructure, could quickly re‑inflate the energy premium. Option structures or flexible hedging strategies remain advisable for both buyers and sellers exposed to palm‑linked biofuel demand.

📍 3‑Day Palm Oil Price Indication (Directional)

• MDEX nearby (Apr–May 2026): Slightly firmer to sideways in EUR terms, with support near the equivalent of 900 EUR/t and resistance just above 950 EUR/t, tracking crude oil volatility and CBOT soyoil.
• MDEX forward (Nov 2026–Mar 2027): Mildly supportive bias, but likely to lag nearby gains as the curve is already moderately backwardated and liquidity shifts toward front months.
• China Dalian palm oil: Risk of modest further softness if crude consolidates lower and domestic demand remains cautious, though any renewed strength in U.S. soyoil could limit downside.