Palm Oil Futures Ease as Biofuel Demand Softens and Stocks Stay Heavy

MDEX palm oil futures have slipped back from recent highs, with the nearby strip retreating around 1% and the forward curve holding in a mildly softer contango. Heavy stocks, weaker biofuel pull and comfortable supplies of competing oils are capping the upside and leaving prices vulnerable to further downside in the short term. Palm oil is trading in a consolidation phase after October's firm levels near MYR 4,600–4,800/t, with the benchmark Jan 2027 now closer to MYR 4,500/t. The market is increasingly shaped by policy-driven demand losses in Europe, abundant soy and canola oil availability, and only latent weather risk in Southeast Asia. While US and Asian biofuel mandates should lend some support into 2027, current high inventories and softer short‑term offtake argue for disciplined hedging and cautious spot coverage.

Prices

Across the active MDEX strip, palm oil futures closed lower on 4 November 2026. The front months lost around 1% versus the prior day:

• Nov 2026: 4,303 MYR/t (−47 MYR, −1.09%)
• Dec 2026: 4,399 MYR/t (−58 MYR, −1.32%)
• Jan 2027: 4,494 MYR/t (−57 MYR, −1.27%)
• Feb 2027: 4,579 MYR/t (−58 MYR, −1.27%)
• Mar 2027: 4,654 MYR/t (−56 MYR, −1.20%)

Further along the curve into mid‑ and late‑2027, contracts eased by around 0.8–1.0%, with most settlements clustering between 4,600 and 4,740 MYR/t. This maintains a gently upward‑sloping structure, signalling adequate nearby availability and a market driven more by carry and financing costs than by immediate scarcity.

External benchmarks confirm this cooling tone. Daily Malaysian CPO reference prices are broadly aligned with the MDEX move, showing a modest decline of around 1.5% over the last five sessions, while international indicators place palm oil at a discount to soybean and sunflower oil, underlining palm’s role as the value option within the vegetable oil complex.    

Supply & Demand

On the demand side, Europe remains a clear weak spot. EU palm oil imports from 1 July to 18 October 2026 have generally declined, as palm‑based fuels in several member states are no longer eligible to meet national blending mandates. The Netherlands remain the largest hub with about 302,000 t, but Italy cut imports by 29% to roughly 196,000 t, and Germany trimmed volumes by around 5% to 70,600 t. Only Greece bucked the trend with significantly higher imports near 33,000 t.

This pattern confirms a structural shift away from palm oil in the European biofuel pool. National restrictions on high‑ILUC feedstocks and sustainability requirements are progressively narrowing the outlet for palm‑based biodiesel, forcing sellers to rely more heavily on food, oleochemical and non‑EU industrial demand. Recent European commentary points to continued downscaling of palm oil’s role in biodiesel quotas, suggesting that any rebound in EU offtake is likely to be modest and policy‑limited in the medium term.    

Beyond Europe, the broader vegetable oil balance is also capping palm oil. In China, end‑October soyoil stocks climbed to nearly 1.5 million tonnes, around 4% above last year and the highest for this point in the season since at least 2024. Crushing plants continue to run hard, while consumption lags, keeping both soyoil and soymeal inventories heavy. Chinese soyoil exports in the first nine months of 2026 more than tripled to roughly 800,000 t, yet domestic futures in Dalian have still slipped by about 1%. This oversupply in a key competing oil dampens substitution into palm.

Rapeseed and canola also add pressure. Canada’s canola ending‑stocks forecast for 2026/27 has been raised by about 32% to nearly 2.0 million tonnes, implying more canola oil availability for the global market. In Ukraine, farm‑gate rapeseed prices have fallen to 17,000–18,000 UAH/t as rising logistics costs squeeze farmer margins, while export offers near 475–500 USD/t at Danube ports and around 520 USD/t at the western border signal discomfort with current surplus levels. Stable export demand so far has prevented a sharper correction, but larger forward stocks are likely to keep competition intense into early 2027.

In the US, biofuel demand is currently rebalancing across feedstocks. Soybean oil use for biofuels in August fell by 17% versus July to about 635,000 t, and renewable diesel plants cut soy oil offtake by more than 28%. At the same time, canola oil consumption rose by over 15%, supported by attractive margins, while high inventories of waste oils and tallow added further pressure on virgin vegetable oils. Market expectations still look for a gradual recovery in demand into late 2026 and 2027, underpinned by federal blending quotas and robust renewable diesel economics, but the timing and strength of this rebound are uncertain given today’s comfortable supply base.

Fundamentals & Weather

Current price softness is occurring against a backdrop of ample stocks and only forward‑looking weather risk. Malaysian inventories have risen from mid‑year lows as seasonal output improves, a trend reflected in the recent softening from highs near 4,600–4,800 MYR/t to the latest settlements around 4,300–4,700 MYR/t on MDEX.    

Weather signals remain important but not yet decisive. Forecasts for Southeast Asia indicate seasonally wet conditions across Indonesia and Malaysia as the main monsoon sets in, with rainfall near to slightly above normal in key palm belts in Sumatra, Kalimantan and Peninsular Malaysia over the next 1–2 weeks. This pattern should support tree moisture and yield potential, even if heavy rains temporarily disrupt harvesting and logistics in some coastal and riverine areas.    

Looking further ahead, the market is still watching the evolution of Pacific conditions. Forecasts suggest an increasing probability of a transition toward La Niña into 2027, which historically correlates with above‑normal rainfall in Southeast Asia. For palm, this often means favourable medium‑term fresh fruit bunch yields but also an elevated risk of short‑term harvest interruptions from flooding or access constraints. For now, though, these are background risks; spot and nearby fundamentals are dominated by stock levels and policy‑driven demand shifts rather than outright weather‑induced tightness.    

Market Outlook & Trading Ideas

Given the current configuration of prices and fundamentals, the market bias for the coming weeks appears mildly bearish to range‑bound:

• Short‑term (next 2–4 weeks): With EU imports subdued, Chinese soyoil stocks heavy and canola/rapeseed supplies ample, palm oil is likely to trade choppily around current levels with a downward tilt. Technical models show prices consolidating rather than trending, with support zones emerging near 4,250–4,300 MYR/t on the front contracts.    
• Medium‑term (Q1–Q2 2027): A gradual firming in biofuel demand in the US and Asia, combined with any weather‑related production hiccups, could stabilise or slightly tighten balances, but large starting stocks of palm, soy and canola limit upside unless a more severe supply shock materialises.

Focused Trading Recommendations

• Producers (Malaysia/Indonesia): Use current contango to hedge a portion of Q1–Q2 2027 sales via forward futures, targeting layers around the 4,600–4,700 MYR/t area while leaving some volume open in case La Niña or policy shifts tighten supply/demand.
• European refiners and biodiesel makers: Maintain a hand‑to‑mouth strategy on palm, favouring rapeseed and waste oils where policy‑compliant, but consider opportunistic palm coverage on price dips if discounts to soy/sunflower widen further.
• Importers in South Asia and MENA: Stagger purchases rather than front‑loading, as current fundamentals favour some additional downside. However, avoid becoming under‑covered into late Q1 2027 when weather risks and US biofuel demand could start to matter more.

3‑Day Directional Outlook (Futures)

*Directional view only; not a price forecast.