Palm Oil Futures Hold Firm as Energy Markets and Biofuel Demand Support Prices

Palm oil futures are trading steadily in a modest contango, with nearby contracts holding above EUR 900/t equivalent, supported by firm energy prices and resilient biofuel demand even as ample stocks and good oilseed weather cap further upside. The current futures curve on the Malaysian derivatives exchange shows only small day‑to‑day changes, with front months slightly firmer and outer months gradually higher, reflecting a balanced market. Strong crude oil and structurally tight global biofuel feedstock markets are underpinning vegetable oils. At the same time, rising Malaysian stocks and good US Midwest weather for soybeans are limiting aggressive gains, suggesting a broadly range‑bound yet supported palm complex into early June.

Prices & Curve Structure

The Malaysian crude palm oil (CPO) futures curve remains in gentle contango. On 29 May 2026, June 2026 closed at 4,470 MYR/t (+0.18% day‑on‑day), with July and August at 4,503 and 4,535 MYR/t respectively, both virtually unchanged from the previous session. This mirrors a broader pattern of mixed, low‑volatility closes along the curve.

Using a rough FX rate of 1 EUR ≈ 5 MYR, front‑month CPO values translate to just under 900–920 EUR/t. Further along the curve, values step up gradually towards early 2027, consistent with market assessments that see modest contango underpinned by expected demand growth, particularly from biofuels, against comfortable near‑term inventories.

Supply, Demand & Cross‑Market Drivers

Vegetable oil markets are currently navigating conflicting signals. In North America, soybean futures have softened for three consecutive sessions, as favourable weather in the US Midwest improves yield prospects: 87% of soybean area is reported planted, with 66% of fields in good to excellent condition, only slightly below analyst expectations. Good rainfall forecasts further support a constructive US crop outlook, weighing on soyoil and, by extension, capping palm oil’s upside.

At the same time, firm energy markets are lending support. Oil prices have risen again in early June, and analysts highlight that palm oil is tracking the crude complex higher, particularly as global biofuel demand expands and feedstock availability remains structurally tight. Recent commentary indicates that palm oil prices have been buoyed by stronger crude, despite record or near‑record Malaysian stocks and a seasonal production uptrend.

Biofuel policy is another key pillar. Indonesia’s move towards higher biodiesel blending (B50) from July 2026 and Malaysia’s B15 mandate from June are expected to channel a larger share of palm oil into domestic fuel use, potentially reducing export availability over time. Estimates suggest Indonesia’s policy alone could absorb an additional 3.5–4 million tonnes of palm oil annually, a significant shift that underpins medium‑term demand.

Fundamentals & Stocks

Inventory data point to a market that is well supplied in the near term but tightening gradually. Malaysian palm oil stocks rose to around 2.3 million tonnes in April 2026, up on the month as output increased, even though exports softened slightly after strong March shipments. This aligns with earlier reports of record or near‑record stocks in late Q1, reflecting robust production and only moderate export growth through Q1 and early Q2.

Despite ample nearby supply, several agencies still anticipate relatively firm average prices in 2026. Some official projections peg average CPO around 3,900–4,100 MYR/t for the year, while other analysts maintain expectations closer to 4,300 MYR/t, indicating a consensus for elevated but not extreme price levels. These levels are broadly consistent with current futures pricing on the Malaysian exchange, suggesting the market has already internalized most of the known supply‑demand information.

In Canada, canola futures have traded mixed, with new‑crop contracts easing as recent rainfall benefits crop establishment, although wet conditions are delaying seeding progress after a long winter. This combination points to a more comfortable outlook for competing oilseeds, reinforcing the idea that palm oil’s rally potential is constrained by broader vegetable oil supply improvements.

Weather Outlook in Key Regions

Short‑term weather conditions in Southeast Asia remain generally supportive for production, but forward‑looking risks are increasing. Recent forecasts highlight the growing likelihood of a strong El Niño pattern in late 2026, which could threaten palm yields across Malaysia and Indonesia through hotter, drier conditions if fully realized.

In the immediate 7‑day horizon, forecasts for Malaysia’s main palm belt indicate typical tropical patterns with frequent showers and high humidity, favourable for near‑term growth. In contrast, the US Midwest is expected to see further rainfall, bolstering soybean yield prospects and pressuring soyoil—one of palm oil’s main competitors in food and fuel applications. This divergence creates a nuanced backdrop: supportive for palm oil from a regional crop perspective, but with global oilseed balances trending looser.

Short‑Term Market Outlook & Trading Ideas

• Bias: sideways to slightly firmer. With front‑month CPO near 4,450–4,500 MYR/t (~890–900 EUR/t) and strong linkage to crude, prices are likely to remain supported but face resistance in the high‑4,400s to low‑4,500s MYR/t band unless energy markets rally further.
• Key support: The 4,200–4,300 MYR/t (~840–860 EUR/t) zone remains a pivotal medium‑term support area highlighted by several price forecasts; dips towards this band may attract buying from end‑users and biodiesel players.
• Upside risk: A renewed spike in crude oil or rapid confirmation of a strong El Niño could trigger fresh speculative length and push CPO beyond 4,600 MYR/t (~920+ EUR/t), tightening the curve.
• Downside risk: Faster‑than‑expected recovery in global oilseed output (soy, canola, sunflower) and any easing of geopolitical tensions that cool energy prices would likely pressure palm oil back into the lower end of its recent range.

3‑Day Directional View (EUR basis)

• Bursa Malaysia CPO (front month, EUR/t): Slightly firmer to sideways; expected to oscillate around ~900 EUR/t with modest upside if crude holds its recent gains.
• Deferred CPO (Q4 2026–Q1 2027, EUR/t): Stable, modestly above nearby months (roughly +10–20 EUR/t), reflecting continued contango and steady demand expectations.
• European palm oil import parity (EUR/t, CIF NWE – indicative): Likely to track futures and freight with a mildly firmer tone, but competitive pressure from cheaper soyoil and rapeseed oil should keep basis gains limited.