Palm oil futures firm along the curve as weather and energy risks build

Palm oil futures on the Malaysian derivatives market are stabilising just above MYR 4,500/t, with a modestly firmer forward curve as traders balance improving sentiment against weather and demand risks. After a volatile start to June driven by currency moves and competing oils, palm oil prices are consolidating near recent highs. Front-month June 2026 on MDEX is around MYR 4,450/t, while the actively traded August and September contracts are holding above MYR 4,550/t, signalling moderate carry and expectations of a slightly tighter market ahead. A softer ringgit, resilient crude oil and early El Niño signals provide medium-term support, but weak import appetite in key consuming regions and concerns about rising Malaysian stocks keep upside in check.

Prices & Term Structure

Palm oil futures on MDEX show a gently upward sloping curve from mid‑2026 into early 2027. June 2026 last settled at MYR 4,450/t, slightly below the MYR 4,505/t indicated earlier this week, reflecting a small correction after recent gains. Key 2026 contracts closed on 11 June at approximately:

• July 2026: MYR 4,512/t (+0.31% on the day)
• August 2026: MYR 4,554/t (+0.35%)
• September 2026: MYR 4,594/t (+0.35%)
• October 2026: MYR 4,632/t (+0.37%)
• November 2026: MYR 4,670/t (+0.45%)
• December 2026: MYR 4,701/t (+0.47%)

Further out, early‑2027 contracts trade near MYR 4,720–4,730/t before easing slightly into mid‑2027, with very long‑dated positions around MYR 4,514/t in thin volume. This structure is consistent with a market expecting firm but not extreme tightness, supported by weather and energy prices but moderated by demand and stock concerns. Recent reports confirm that benchmark August 2026 BMD contracts remain close to MYR 4,500/t after brief declines on weaker Dalian vegetable oils. For reference, at an indicative FX rate of 1 EUR ≈ 5.0 MYR, current values translate roughly as follows:

Supply, Demand & External Drivers

Malaysian futures have recently oscillated between gains on stronger crude and soybean oil and pullbacks driven by profit‑taking and relative weakness in Dalian vegetable oils. News earlier this week highlighted CPO futures rising on firmer energy and Chicago soyoil, while a weaker ringgit improved export competitiveness. However, more recent sessions saw some pressure as Dalian oils softened and traders reassessed export demand. On the supply side, production has been recovering from earlier seasonal dips, and the market is watchful for potential stock builds in Malaysia following indications of higher output in March and the possibility of rising inventories into mid‑year. At the same time, global energy markets remain tight: Brent crude is holding above EUR 95–100/t‑equivalent in oil terms (around USD 100/bbl), underpinning demand for vegetable oils in biofuel and linking palm oil more closely to energy market volatility. Demand signals are mixed. China’s palm oil stocks have risen substantially year‑on‑year, and recent reports show elevated inventories of vegetable oils, reducing the urgency for near‑term imports. Meanwhile, China’s crude oil imports have dropped to multi‑year lows as refiners cut runs, indirectly capping upside for energy‑linked commodities. Nonetheless, structural growth in edible oil demand and steady consumption in India and emerging markets continue to provide a floor, while any renewed restocking cycle in China could quickly tighten the balance.

Fundamentals & Weather Outlook

Fundamentals currently point to a cautiously supported market. Average Malaysian CPO prices in early 2026 have been about 12% below the previous year, but the recent climb back toward MYR 4,500/t suggests a transition from a soft to a firmer price regime. The modest contango on the MDEX curve signals adequate nearby availability but also a premium for forward supplies, consistent with weather‑driven risk pricing. Weather is moving to the forefront. The World Meteorological Organization now assigns about an 80% probability to El Niño conditions developing for June–August 2026, implying heightened risk of drier‑than‑normal conditions in Indonesia and parts of Southeast Asia. Indonesian authorities are downplaying the prospect of an extreme “Godzilla” El Niño but acknowledge a significant chance of a weak‑to‑moderate event. Malaysian long‑range forecasts similarly point to strengthening El Niño influences over the coming months. For palm oil, this raises the probability of yield stress later in 2026 if rainfall deficits develop, justifying some weather premium in forward contracts.

Trading & Risk Outlook

• Bias: mildly bullish – With the MDEX curve holding above MYR 4,500/t and weather risks rising, the balance of risks tilts slightly to the upside over the next 1–3 months, provided global vegetable oil prices do not weaken sharply.
• Producers: Consider layering in incremental hedges for Q4 2026–Q1 2027 around 930–950 EUR/t, using the current contango to secure margins while retaining some upside via options given El Niño uncertainty.
• Consumers: End‑users with low coverage may use current consolidation near 890–920 EUR/t (summer/autumn positions) to build partial coverage, but avoid over‑hedging in case Chinese demand remains subdued and stocks rise.
• Speculative participants: Risk‑reward favours selective long strategies on weather breaks or sharp dips toward the lower end of the recent range, with tight stops given sensitivity to moves in Dalian, energy markets and FX.

3‑Day Price Indications (Directional)

• MDEX/Bursa Malaysia CPO (nearby, MYR basis; ≈ 890–900 EUR/t): Likely to trade sideways to slightly higher, with support near MYR 4,400/t and resistance around MYR 4,600/t as traders track Dalian and crude oil.
• MDEX August 2026 (≈ 910–915 EUR/t): Mild upside bias if crude and soyoil remain firm; dips toward MYR 4,500/t may attract buying interest.
• Forward strip Q4 2026 (≈ 935–945 EUR/t): Expected to hold a small premium over nearby months as El Niño risk is gradually priced in, barring a sharp deterioration in global demand.