Palm Oil Market Analysis: Gradual Gains and Subtle Shifts as Supply and Weather Uncertainties Loom

The palm oil market is navigating a period of measured optimism as futures prices on the Malaysian Derivatives Exchange (MDEX) continue to post modest gains into late July 2025. Despite record supply volumes from Indonesia and Malaysia, ongoing concerns over adverse weather patterns and labour shortages are providing a mild bullish undertone. In recent months, palm oil has exhibited increased volatility, with prices responding to shifting fundamentals such as trade policy adjustments in key importers (notably India and China), evolving biodiesel mandates in Southeast Asia, and fluctuating production costs.

The market remains highly sensitive to seasonal weather developments, especially with the approach of the regional monsoon season—expected to impact both harvesting schedules and yield forecasts. Meanwhile, global inventories have tightened slightly compared to a year ago, reinforcing cautious optimism among producers. Traders are closely watching the interplay of speculative interest and physical demand, particularly with the food and energy sectors continuing to vie for limited supply. This landscape sets the stage for a nuanced trading environment heading into Q3 and beyond.

📈 Prices: Current MDEX Palm Oil Futures Overview

Contract	Last Close (MYR/t)	Weekly Change (MYR)	Change (%)	Market Sentiment
Aug 25	4189	+15	+0.36%	Neutral/Bullish
Sep 25	4227	+11	+0.26%	Stable
Oct 25	4239	+14	+0.33%	Stable
Nov 25	4242	+13	+0.31%	Steady
Dec 25	4247	+20	+0.47%	Upbeat
Jan 26	4242	+18	+0.42%	Upbeat
Feb 26	4226	+17	+0.40%	Neutral
Mar 26	4205	+18	+0.43%	Neutral

Note: Prices are in Malaysian Ringgit (MYR) per metric ton. Data as of July 22, 2025.

🌍 Supply & Demand Drivers

• Production: Malaysia’s output remains marginally below last year’s levels due to persistent rainfall and labor shortages. Indonesian stocks, though ample, have seen export bottlenecks amid regulatory reviews.
• Exports: Indian imports rose again in June, anticipating potential price hikes. China, however, remains cautious, focusing on soybean oil alternatives. The EU has maintained stable import volumes despite ongoing sustainability debates.
• Inventories: Regional stocks at end-June were marginally tighter (-2%) compared to last year, largely due to export acceleration and weaker-than-expected harvest yields.
• Biodiesel mandates: Indonesian and Malaysian biodiesel programs (B35/B30) continue to absorb significant local output, underpinning baseline demand.
• Speculative positioning: Managed money increased net long exposure amid weather uncertainty, signalling a mildly bullish stance.

📊 Fundamentals & Global Context

Country	2024/25 Production (Mt)	Stocks (Mt)	YOY Change
Indonesia	46.3	3.8	-0.8%
Malaysia	19.2	1.7	-1.5%
India (imports)	n/a	2.2	+3.5%
China (imports)	n/a	1.1	-1.2%

Source: Aggregate estimates, industry/USDA, July 2025.

🌦️ Weather Outlook

• Malaysia: Heavier than normal rainfall forecast through late July-August could hamper harvesting and fresh fruit bunch delivery, raising potential for short-term price spikes.
• Indonesia: Patchy rainfall persists, leading to uneven ripening and logistics challenges in Sumatra and Kalimantan.
• Africa/Latin America: No material shifts in weather, but vigilance remains for heat stress events in Ghana and Colombia.

In summary, the regional weather outlook points to localised disruptions, supportive of spot prices but not yet critical enough to drive a major rally.

📆 Trading Outlook & Recommendations

• Short-term price action likely to remain range-bound between MYR 4,200–4,300/t for nearby contracts.
• Upside risks if Southeast Asian rains intensify and labour bottlenecks persist.
• Monitor Indian and Chinese import signals for hints of physical market tightness.
• Buyers should consider opportunistic purchases on minor pullbacks, as downside appears limited by production and weather risks.
• Sellers may look to lock in margins for forward-month contracts into Q4/Q1 2026.
• Speculators: Mildly bullish bias favoured, with tight stop-losses due to looming volatility.

🔮 3-Day Regional Price Forecast (MDEX)

Date	Nearby Contract	Forecast Price (MYR/t)
23 Jul 2025	Aug 25	4190–4200
24 Jul 2025	Aug 25	4195–4210
25 Jul 2025	Aug 25	4200–4220

Prices remain supported within a narrow range, with weather disruptions in Malaysia presenting near-term upside risk.