Palm Oil Under Pressure: MDEX Curve Softens as Nearby Contracts Slip

Palm oil futures on the Malaysian Derivatives Exchange (MDEX) eased further on 2 April, with the entire forward curve in the red and nearby months losing around 1%. The market is consolidating after the sharper sell-off seen in the 2027–2029 positions a day earlier, keeping the structure slightly backwardated but with pressure building on the front. Despite the modest daily declines, prices remain historically elevated, leaving refiners and buyers cautious but not yet panicked. The May–August 2026 strip is trading just above EUR 900/t (approx.), while 2027 and beyond have corrected more steeply, suggesting that the market is slowly discounting a more comfortable medium‑term supply outlook. Short‑term, sentiment is fragile: any negative demand surprise from key importers or improved production signals from Southeast Asia could deepen the correction.

Prices & Term Structure

MDEX palm oil futures closed lower across all listed contracts on 2 April 2026:

*EUR conversion based on an indicative rate of 1 EUR ≈ 5.2 MYR.

Front-month contracts (Apr–Sep 2026) fell between 0.9% and 1.0%, while the near back months into early 2027 posted slightly smaller percentage losses (around 0.5%–0.9%). The curve remains gently backwardated from mid‑2026 into early 2027, but the pronounced declines of 2.3%–2.8% seen on 1 April in the 2027–2029 positions highlight that the market has recently repriced longer‑term risk lower.

Supply & Demand Context

The current price level above EUR 880–910/t suggests that, although the market is off its highs, supply is still perceived as tight enough to justify a risk premium. Nearby weakness points to more balanced short‑term fundamentals, with expectations of seasonally improving production in Southeast Asia and slightly softer import demand from major buyers after earlier front‑loaded purchases.

The sharper correction further along the curve implies that participants are increasingly confident about medium‑term production growth and potential competition from other vegetable oils. This is consistent with a market that is no longer trading a worst‑case supply shock but is instead recalibrating towards more normal stock‑to‑use ratios.

Market Fundamentals & Positioning

• Front‑end pressure: Consecutive daily losses near 1% in the May–August 2026 contracts, after a stronger sell‑off in the deferreds on 1 April, point to a broad‑based liquidation rather than a single contract dislocation.
• Curve signals: The still‑backwardated structure shows that prompt supply remains relatively tighter than the outer years, but the slope is flattening as long‑dated values fall faster than nearby months.
• Refiner margins: With feedstock near EUR 900/t, refiners and biodiesel producers remain sensitive to any further cost increases, which limits the market’s ability to sustain rallies without fresh bullish news.

Weather & Regional Outlook

Weather in key producing regions (Malaysia and Indonesia) in the very near term will remain a critical driver of sentiment, especially as the market leans towards expectations of improving output. Any indications of persistent dryness or flooding could quickly re‑widen the backwardation by lifting nearby contracts relative to deferred months.

3‑Day Price & Trading Outlook

• Bias: Slightly bearish to sideways in the next three sessions, with scope for further modest declines if no new bullish catalysts emerge.
• Volatility: Intraday swings likely to remain contained given the orderly nature of recent declines, but headline‑driven spikes remain possible.

Trading Recommendations

• Physical buyers: Consider incrementally extending coverage on dips towards the lower end of the recent range, especially for Q3–Q4 2026, while avoiding aggressive front‑loading of 2027+ needs after the recent sharp long‑dated sell‑off.
• Producers: Use any short‑covering rallies to layer in hedges for late‑2026 and early‑2027 shipments, as the curve still prices a premium over longer‑term historical averages.
• Speculators: Short‑biased strategies in nearby contracts may remain attractive but should be managed with tight risk limits, given the potential for weather‑ or policy‑driven price spikes.