Palm Oil Pressured by Rising Malaysian Stocks but Forward Curve Turns Firmer

Palm oil futures are under pressure from rising Malaysian inventories and soft export demand, but the forward curve has rebounded after Thursday’s sell-off, signaling that downside may be limited in the near term. Palm oil trading on Bursa Malaysia remains dominated by supply-side bearishness as Malaysian stocks increase for the fifth consecutive month and crude palm oil (CPO) output hits its highest level since December 2025. At the same time, export demand has weakened further in early September. This combination drove nearby contracts lower on Thursday, before a modest recovery in deferred positions on Friday. With physical CPO prices still elevated, the market is balancing heavier stocks and softer exports against robust energy markets and competing vegetable oil dynamics.

Prices

The latest MDEX curve shows a sharp dip on Thursday followed by a partial rebound in forward months on Friday. September 2026 closed at MYR 4,598/t, down MYR 71 (-1.5%) day-on-day, while October 2026 also settled lower at MYR 4,716/t on Thursday.

By Friday, however, most actively traded contracts from October 2026 through September 2027 gained around 1.0–1.4%, with November 2026 up to MYR 4,939/t and January 2027 at MYR 5,209/t. Further out, mid‑2027 contracts are clustered in the low MYR 5,300s, and late‑2027 around MYR 5,000/t, indicating a gently upward‑sloping curve from spot into mid‑2027 before easing slightly into 2028.

For context, Malaysian local delivered CPO prices stand around MYR 4,660/t as of 9 September 2026, only modestly below front futures and confirming that current outright price levels remain historically high despite the recent pullback. 

*EUR conversions are approximate, assuming 1 EUR ≈ 5.0 MYR.

Supply & Demand

Malaysian fundamentals are currently skewed bearish. Official data show palm oil stocks rising for the fifth consecutive month, highlighting a clear inventory rebuild. At the same time, crude palm oil production has increased for three straight months, reaching its highest level since December 2025, consistent with seasonal recovery and better yields.

On the demand side, export performance has softened. Early September shipment estimates from key surveyors point to double‑digit percentage declines versus the previous month, and the latest Malaysian Palm Oil Board (MPOB) report confirms a 7–8% month-on-month drop in August exports. Weaker exports, particularly to key markets in Asia, are amplifying the pressure from higher production and contributing directly to the inventory overhang. ️️️️️️

Fundamentals & External Drivers

The futures curve structure indicates that the market is pricing in current oversupply but still expects relatively firm values going into 2027. Nearby contracts are weighed down by heavy stocks, while deferred contracts above MYR 5,300/t reflect expectations of tighter balances or at least stable demand as biodiesel mandates and food demand continue to underpin consumption.

External drivers are mixed. Palm oil competes closely with soybean oil and other soft oils; the recent softness in related vegetable oils and energy prices has limited upside. However, crude oil remains comparatively firm, supporting biodiesel economics at current palm oil price levels. Plantation equity indices tied to palm oil producers have eased slightly in early September after testing 52‑week highs, suggesting cautious sentiment rather than a decisive turn lower.

Weather & Crop Outlook

Weather in key Southeast Asian palm regions is seasonally mixed but not yet strongly disruptive. Current reports do not indicate a widespread production threat in Malaysia or Indonesia over the very near term, which aligns with the recent rise in Malaysian output.

Looking ahead, any shift toward drier-than-normal conditions linked to broader climate patterns would be watched closely, but for now the near-term supply outlook remains comfortable. Without a clear weather shock, inventories are likely to stay elevated in the coming weeks if exports do not recover materially.

Trading Outlook

• Short-term bias (next 1–2 weeks): Slightly bearish to sideways for nearby months, given rising stocks and weaker exports. Rallies toward the upper end of the MYR 4,800–5,000/t band (approx. EUR 960–1,000/t) may attract selling.
• Hedging for consumers: Food and oleochemical buyers may consider scaling in hedge coverage on dips below MYR 4,600/t (around EUR 920/t) for late‑2026/early‑2027 needs, as the forward curve remains historically elevated but offers moderate discount to potential weather- or energy-driven spikes.
• Producers and sellers: Plantation and crusher hedging for 2027 looks attractive above MYR 5,300/t (around EUR 1,060/t), locking in strong margins against current cost structures while stocks are still ample.

3‑Day Price Indication (EUR)

• Bursa Malaysia CPO nearby (equiv. Sep/Oct 2026): Expected to trade broadly in a range of about EUR 900–950/t, with a mild downside bias if export data remain weak.
• Q1 2027 futures strip: Likely to hold around EUR 1,020–1,070/t, supported by curve structure and forward hedging interest despite current inventory pressure.
• Calendar 2027 average: Market pricing suggests a stable corridor near EUR 1,050–1,100/t in the very short term, unless a sharp move in energy or competing oils triggers a broader re-pricing.