Palm Oil Market in Focus: Price Retreat Amid Weak Demand and Weather Optimism

The palm oil market is at a pivotal juncture as futures prices on the Malaysian Derivatives Exchange (MDEX) turned lower, mirroring general weakness across global vegetable oil markets. This downturn comes despite relatively steady production fundamentals but coincides with softer export figures and bearish sentiment cascading from related commodity complexes. External influences—including a potent combination of subdued demand from major importers like China, healthy South American soybean crop progress, and a backdrop of declining oilseed prices—are creating significant headwinds for palm oil.

Adding to the caution, Malaysian palm oil exports have been weak for early December, and speculative traders have recently reduced bullish positions in oilseeds and oils. Meanwhile, growing regions in South America are experiencing favorable weather conditions, supporting expectations for robust soybean and, by extension, soyoil supplies that compete directly with palm oil on the global stage. All these elements converge to paint a complex picture for traders and end-users looking at 2025 and 2026 contracts.

📈 Prices

Contract	Close (MYR/t)	Change (MYR)	% Change	Date
Dec 2025	4,000	+20	+0.50%	15.12.2025
Jan 2026	3,981	-10	-0.25%	16.12.2025
Feb 2026	3,995	-13	-0.33%	16.12.2025
Mar 2026	4,000	-13	-0.33%	16.12.2025
Apr 2026	4,003	-15	-0.37%	16.12.2025
May 2026	4,000	-16	-0.40%	16.12.2025

Market sentiment: Bearish/Neutral

🌍 Supply & Demand

• Malaysian palm oil exports have been subdued in December, weighing on prices.
• Global demand from China—an essential palm oil buyer—is underperforming, with recent soybean export sales to China also disappointing.
• Competitive oilseed (particularly South American soyoil) production is expected to remain strong, pressuring palm oil’s global market share.

📊 Fundamentals

• Global Inventories: Malaysian palm oil stockpiles remain robust, buoyed by weak exports and persistent production.
• Related Oils: Both canola and soy oil futures declined alongside palm oil, as reflected by ICE Winnipeg and Chicago Board of Trade (CBOT) data.
• Speculative Positioning: Funds have reduced net long positions in oilseeds/oils, reflecting a more cautious outlook.
• NOPA Report: Soybean crush volumes in the US dropped month-on-month but remain at record highs for November; soyoil stocks are up 40% year-over-year, intensifying competition.

⛅ Weather Outlook

• Malaysia & Indonesia: Monsoon rains continue, ensuring good soil moisture but raising slight risks of flooding in some plantations, which could briefly disrupt logistics.
• South America: Brazil’s soybean planting is nearly complete (97%), with excellent rainfall reported in all major regions. Early harvest and export activities could further saturate the oilseed market from January onward.

Impact: Weather is overall favorable for both output and logistics, supporting the global supply of oilseeds and vegetable oils.

🌎 Global Production & Stocks

Country	2025 Palm Oil Output (‘000 t)	Change vs Prior Yr	Ending Stocks (‘000 t)
Malaysia	19,000	+1%	2,350
Indonesia	49,000	+0.5%	4,030
India (importer)	0.4	flat	1,000
China (importer)	0.6	+2%	1,300

📆 Trading Outlook & Recommendations

• Expect continued sideways-to-lower trading in the near term.
• Monitor China’s import pace and export data from Malaysia closely for demand recovery signals.
• Watch South American harvest progress—earlier than normal exports could extend pressure on palm oil prices through Q1 2026.
• Maintain cautious positioning; aggressive long entries are not recommended until stocks are drawn down or export demand rebounds.
• End users should consider forward locking where margin certainty is required amid potential near-term volatility.

🔮 3-Day Regional Price Forecast (MDEX, MYR/t)

Date	Forecast Price (MYR/t)	Change
Day 1	3,990	-0.25%
Day 2	3,980	-0.25%
Day 3	3,975	-0.12%

Summary: Palm oil faces headwinds from weak exports, robust competitor crops, and cautious fund activity. Weather remains broadly favorable, but market participants should remain vigilant to changes in trade flows or unexpected disruptions.