Palm oil futures on MDEX firm into 2027 as El Niño dryness and shifting exports tighten balances despite high stocks. Concise price, supply and trading outlook.
Prices
MDEX crude palm oil futures on 23 October 2026 show a gently ascending forward curve. The front Nov 2026 contract last settled at MYR 4,559/t, up MYR 8 or 0.18% on the day, with modest volume of 412 lots. Dec 2026 closed at MYR 4,698/t (+MYR 3, +0.06%), while the actively traded Jan 2027 position finished at MYR 4,795/t, also MYR 3 higher (+0.06%).
Further along the curve, prices continue to firm into mid-2027: Feb 2027 is marked at MYR 4,885/t (unchanged), Mar 2027 at MYR 4,965/t (-MYR 2), Apr 2027 at MYR 5,020/t (unchanged) and May 2027 at MYR 5,045/t (+MYR 1). Thinly traded late-2027 contracts ease slightly from this peak, with Sep 2027 at MYR 4,920/t, before a block of low-liquidity 2028–2029 positions sits around MYR 4,703/t. The structure points to a market that is moderately backward relative to the 2027 peak but still well supported versus many analysts’ earlier 2026 average price targets around MYR 4,400/t.
| Contract | Settlement (MYR/t) | Daily change (MYR) | % change | Volume (lots) |
|---|---|---|---|---|
| Nov 2026 | 4,559 | +8 | +0.18% | 412 |
| Dec 2026 | 4,698 | +3 | +0.06% | 1,013 |
| Jan 2027 | 4,795 | +3 | +0.06% | 5,679 |
| Apr 2027 | 5,020 | 0 | 0.00% | 263 |
| May 2027 | 5,045 | +1 | +0.02% | 203 |
Supply & Demand
On fundamentals, Malaysia’s palm oil production is reported to have peaked in September, with output up 16.4% month-on-month to 2.11 million tonnes, supported by stronger fresh fruit bunch yields and improved extraction rates. At the same time, cumulative exports for January–September 2026 were 4.3% higher year-on-year, even though September shipments fell 12.1% to 1.12 million tonnes amid temporary logistics constraints in the Strait of Malacca and increased competition from Indonesia.
Despite the recent export dip, Malaysian authorities expect the weak September performance to be short-lived, with November prices likely to stay above RM 4,600/t as exports recover into key destinations. Indonesian reference prices and export levies remain elevated, indicating firm global demand and continued policy-driven tightness on the largest producer’s side. The October Indonesian CPO reference price stands at about US$1,042/mt, up 3.4% from September, with an export duty and levy that together keep some floor under international quotations.
Beyond Southeast Asia, logistical issues in the Black Sea continue to constrain sunflower oil supply, limiting substitution and indirectly supporting tropical oils. Biofuel demand adds another structural pillar: Indonesia’s B50 biodiesel mandate alone is expected to consume around 18 million tonnes of CPO annually (more than a third of national output), tightening the exportable surplus and increasing the sensitivity of global balances to any production shock.
Weather & Structural Drivers
The key medium-term risk factor is the ongoing development of a strong to very strong El Niño, with multiple forecasters assigning probabilities above 90% for peak intensity between October and December 2026. Regional climate centres project below-normal rainfall over much of the Maritime Continent during this period, especially in southern parts of the region where many estates are located.
Recent monitoring shows that seven of eleven major palm-growing regions in Indonesia and Malaysia received less than three-quarters of normal rainfall in the 90 days to 10 October, highlighting a growing moisture deficit. In Malaysia, some analysis points to Sarawak as particularly dry, with rainfall running roughly two-fifths below average in recent months, a pattern that could start weighing on early-2027 fruit development and potentially on current oil extraction rates if sustained.
Malaysian and regional research houses expect El Niño to trim Malaysia’s total palm oil output by around 2–4% year-on-year starting in Q4 2026, with greater downside risk if dryness intensifies or persists into 2027. Combined with Indonesia’s high biodiesel-related offtake and regulatory uncertainty around land and export policy, this points to structurally tighter balances even if current inventory levels are still comfortable.
Market Sentiment & Positioning
Market commentary from Kuala Lumpur indicates that sentiment has shifted from concern over record-high inventories to cautious optimism as export surveys for early October show stronger shipments and as authorities float targeted measures such as temporary export tax waivers to ease domestic stock burdens. Traders frame such measures as bullish for international prices if they succeed in accelerating flows without triggering an overhang later in the season.
At the same time, investors remain wary of broader macro volatility and ongoing Southeast Asian haze headlines, which have pressured some plantation equities despite resilient physical prices. The relatively modest day-to-day changes in MDEX futures, alongside healthy volumes in key 2027 contracts, suggest that commercial hedging is quietly increasing further out the curve while speculative length stays measured.
3–6 Month Outlook & Trading View
Looking ahead into late Q4 2026 and Q1 2027, the base case is for palm oil prices to remain well supported, with front-month benchmarks likely trading at or above current levels if El Niño dryness persists and Malaysian exports normalise after the September dip. Official guidance from the Malaysian Palm Oil Council that November prices should stay above RM 4,600/t aligns with the present MDEX structure, where nearby contracts are already holding in the mid-4,000s and early-2027 positions push above MYR 4,800–5,000/t.
Risks tilt asymmetric to the upside: downside would mostly stem from a faster-than-expected recovery in rainfall, a sharp correction in competing oil prices, or a macro-led demand shock in major importing regions. Upside could materialise if El Niño proves stronger or longer than currently modelled, if Indonesian export policy tightens, or if logistics disruptions in the Black Sea and Strait of Malacca persist.
Trading Recommendations
- Refiners & food buyers: Consider extending coverage modestly into H1 2027 while the curve between Jan–May 2027 still trades only ~MYR 250–500/t above nearby levels, given rising weather and policy risks.
- Producers: Use current strength in the Apr–Jul 2027 strip around MYR 5,000/t as an opportunity to layer in hedges, especially for estates most exposed to El Niño dryness and potential yield losses.
- Speculative participants: A cautiously bullish stance via buying dips in nearby contracts against short positions in less liquid late-2028/2029 maturities could benefit from the steeper weather-driven risk premium in 2027.
Short-Term Price Indication (Next 3 Days)
- MDEX front month (Nov 2026): Bias mildly firmer around the MYR 4,500–4,600/t area, with limited downside while export and weather headlines stay supportive.
- MDEX Jan 2027: Expected to hold a premium of roughly MYR 200–250/t over the front month, reflecting growing concern over 2027 production.
- Forward strip (Apr–Jul 2027): Consolidation likely near MYR 5,000/t; significant breaks lower would probably require clear evidence of improving rainfall or weaker export demand.