Palm Oil Futures Edge Higher as Forward Curve Steepens Moderately

Palm oil futures on the Malaysian derivatives exchange posted modest gains on August 4, with the forward curve remaining in contango but only mildly upward-sloping. The market is cautiously firmer on the near-term strip, while deferred contracts signal expectations of adequate medium‑term supply despite rising biofuel demand. Palm oil remains underpinned by concerns over weather volatility in Southeast Asia and by structurally strong consumption in food and biofuels. However, recent data still point to recovering production in Malaysia and Indonesia into the 2025/26 season, keeping strong rallies in check. The current price structure suggests a market that is tight enough to support nearby prices but not tight enough to justify a pronounced risk premium further out, leaving room for headline‑driven volatility around weather and policy news.

Prices

The MDEX crude palm oil curve on 4 August 2026 shows a steady, moderate uptrend along the nearby contracts. The front-month August 2026 contract settled at 4,519 MYR/t, up 31 MYR on the day (+0.69%). September 2026 closed at 4,606 MYR/t (+0.37%), and October 2026 at 4,644 MYR/t (+0.32%).

Further out, November and December 2026 settled at 4,679 and 4,713 MYR/t respectively, while January 2027 traded at 4,741 MYR/t. The curve continues to rise into mid‑2027, peaking around 4,769–4,768 MYR/t for March and April 2027 before easing slightly toward mid‑2027 levels around 4,732–4,707 MYR/t. Ultra‑deferred contracts from January 2028 onward were indicated around 4,650 MYR/t with no reported volume, underscoring limited hedging interest so far out.

*EUR estimates assume ~5.14 MYR/EUR for illustration only.

Supply & Demand Drivers

Fundamentally, palm oil continues to face a push‑and‑pull between gradually improving output and still‑robust demand. USDA’s 2025/26 projections point to higher Malaysian palm oil production and rising exports, with ending stocks expected to increase versus the previous season, indicating more comfortable availability if weather cooperates.

On the demand side, structural growth from food consumption in Asia and accelerating biofuel mandates in Indonesia and other producers remain key supports. Indonesia’s progressive move toward higher blending ratios such as B50 significantly lifts domestic palm oil absorption, tightening exportable surpluses over time. This helps explain why the forward curve is in contango but not steep: the market prices in better supply, but also a solid demand floor.

Weather & Production Outlook

Weather risk is increasingly in focus. Malaysia and Indonesia are expected to experience hotter and drier conditions into late 2026 and 2027 as a strong El Niño phase develops, which typically brings drier weather to the Maritime Continent and can stress oil palm yields with a lag. Recent reports already highlight concerns over more extreme dry‑season patterns in parts of Indonesia, which could curb yield gains if dryness intensifies.

At the same time, recent seasons have shown that palm oil output can rebound strongly in Malaysia when rainfall patterns normalize, as seen in the 2025/26 production forecasts. This duality – short‑term recovery versus medium‑term climate risk – is a key reason nearby contracts are supported while more distant maturities remain only modestly above spot.

Market Structure & Fundamentals

The current futures strip reflects a market in mild contango, suggesting adequate inventories and no acute nearby shortage, yet with enough uncertainty to prevent backwardation. Volumes are concentrated in the active 2026–2027 contracts, while 2028–2029 positions show no trading activity, indicating that most hedging and speculative interest is focused on the next one to two years where weather and policy risks are clearer.

Global palm oil remains dominated by Indonesia and Malaysia, which together account for the bulk of world production, and have continued to expand or intensify planted areas over the past decade. However, policy constraints on further land expansion and climate‑related yield variability mean future supply growth will rely more on productivity than area, adding to the medium‑term risk premium embedded in forward prices.

Short-Term Trading Outlook

• Bias: Near‑term tone is mildly bullish while the curve remains in a moderate contango, with upside driven by any weather‑related supply scares or stronger energy prices supporting biofuel demand.
• Producers: Consider layering in additional hedges on late‑2026 and early‑2027 maturities where prices around ~€900–930/t offer reasonable margin protection, while leaving some upside open in case of a pronounced weather shock.
• Consumers: End‑users may look to secure a portion of 2026–H1 2027 needs on price dips, given improving but still weather‑sensitive supply and firm structural demand from biofuels.
• Speculators: Spreads between nearby 2026 and mid‑2027 contracts offer opportunities if weather developments or stock data shift expectations on how long the current mild contango can persist.

3-Day Directional View (EUR basis)

• MDEX front month (Aug 2026): Slightly firmer to sideways in EUR terms, with support around current ~€880/t and resistance near €900/t equivalent.
• Late 2026 strip (Oct–Dec 2026): Stable to mildly higher, tracking any fresh weather headlines or energy‑market moves.
• Early 2027 (Jan–Mar 2027): Largely stable; moves likely to be smaller and driven by curve adjustments rather than standalone shifts in long‑dated fundamentals over the next few sessions.