Palm Oil Softens as Cheaper Crude Undercuts Biofuel Support

Prices in the Malaysian palm oil futures curve are easing modestly, with near-term contracts under light pressure as sharply lower crude oil prices reduce biofuel demand support. Strong Malaysian export data is cushioning the downside, but weakness in competing oils and a softer energy complex cap upside for now. The palm oil market is trading in a narrow, slightly softer range as the energy sell-off spills over into the vegetable oil complex. Malaysian futures on 26 June show mild contango along the curve and a third consecutive day of declines in the actively traded September contract. Cheaper crude oil following improved traffic through the Strait of Hormuz has eroded the relative attractiveness of biodiesel feedstocks, while losses in soyoil and other competing oils add headwinds. Robust Malaysian exports in June and generally firm oilseed fundamentals are preventing a steeper correction, but sentiment remains cautious.

Prices

The MDEX palm oil strip on 26 June 2026 closed marginally lower at the front, with a gentle upward slope into early 2027 before flattening further out. The September 2026 contract settled at 4,568 MYR/t, down 11 MYR (-0.24%) on the day, marking the third consecutive daily loss. Nearby July 2026 closed at 4,504 MYR/t (-0.20%), while August finished at 4,539 MYR/t (+0.09%).

Further along the curve, October–December 2026 contracts gained 8–12 MYR (around +0.2%), closing between 4,591 and 4,631 MYR/t, indicating only limited bearishness beyond the prompt months. Early 2027 positions (January–June) posted small gains of 6–8 MYR, while low-liquidity contracts from January 2028 onward traded flat around 4,536 MYR/t, signalling that the market currently expects broadly stable long‑term price levels.

*EUR conversion based on an indicative rate of 1 EUR ≈ 5.12 MYR; values rounded.

Supply & Demand

Physical fundamentals remain relatively constructive. Malaysian export loadings between 1 and 25 June rose by roughly 10–11% versus the same period in May, reflecting stronger overseas demand, particularly from price‑sensitive markets. Comparable survey data also points to a month‑on‑month export increase in the low single digits for June 1–25, confirming a generally firmer export trend into the end of the month.

On the oilseed side, India is importing more soybeans because domestic soymeal prices are high and the local crop is smaller, with 2025/26 soybean imports revised up to 700,000 tonnes. This shift, though modest in volume, underscores tightness in parts of the protein and vegoil complex. In China, fresh purchases of new‑crop soybeans, including over 200,000 tonnes directly reported plus additional volumes to unknown buyers, signal cautious but improving demand that indirectly supports vegoil consumption.

Cross‑Market & Energy Linkages

The dominant short‑term driver is the energy market. Crude oil has retreated sharply as tanker traffic through the Strait of Hormuz improved following progress in U.S.–Iran peace talks, sending Brent back toward or below pre‑war levels. On 26 June, Brent futures were trading in the low–mid‑70s USD/b range after losing around 15–20% over the month, weighing on the wider biofuel and vegetable oil complex.

Lower fossil fuel prices reduce the economic incentive for biodiesel blending, eroding demand for feedstocks such as palm, rapeseed and soyoil. At the same time, losses in rival vegoils on Dalian and the Chicago Board of Trade are exerting additional pressure on palm oil futures. While strong Malaysian exports provide some offset, their positive effect has so far been insufficient to counter the bearish energy narrative.

Weather & Production Outlook

No major new palm‑specific weather shocks have emerged over the past few days, and output signals from Malaysia hint at a relatively stable to slightly softer production profile after recent data showed a month‑on‑month decrease earlier in June. Seasonal patterns suggest that palm oil production should gradually rise into the second half of the year, but any anomalies in rainfall across Southeast Asia could alter this trajectory.

In India, monsoon‑related uncertainty is adding risk to local oilseed production and has already contributed to higher soymeal prices and increased soybean imports. If the monsoon underperforms, regional demand for imported vegoils, including palm, could firm later in the year, partially offsetting today’s energy‑driven weakness.

Trading Outlook

• Bias: Near‑term tone is mildly bearish to sideways, driven predominantly by cheaper crude and softer competing oils, despite supportive export flows.
• Producers: Consider scaling in additional hedges on rallies in Q3 2026 contracts around the upper end of the recent range, as the curve still prices a modest premium into late 2026 while energy headwinds persist.
• Consumers: End‑users may cautiously extend coverage into late 2026/early 2027 on price dips toward the lower end of the current MYR 4,500–4,600/t band, balancing downside from energy with potential upside from weather or demand surprises.
• Spread & arbitrage: The relatively flat forward curve beyond mid‑2027 suggests limited reward for long‑dated time‑spreads; focus instead on prompt versus nearby spreads where export and stock swings can still create short‑term opportunities.

3‑Day Directional View (EUR Basis)

• MDEX front‑month CPO (Malaysia): Slight downside to sideways over the next three sessions, with improved crude oil flows and soft energy prices likely keeping futures near the current equivalent of roughly 870–900 EUR/t.
• European palm oil import market: Flat to mildly softer in EUR terms, tracking MDEX and crude oil; FX moves versus MYR and USD remain a secondary but relevant driver.

Absent a renewed spike in crude or a sudden shift in export or weather news, palm oil is likely to consolidate in a relatively tight range, with sentiment anchored more by macro‑energy dynamics than by palm‑specific fundamentals in the immediate term.