Palm Oil Market May 2026: High Stocks Cap Prices as Biodiesel Demand Builds

Palm oil prices remain historically high but range-bound in mid-May 2026, as rising Malaysian stocks and softer exports offset structurally firm demand from food and biodiesel. Nearby futures on Bursa Malaysia are trading around EUR 910–920/t equivalent, with a mild downward bias in recent sessions.

The market is being pulled in two directions. On the bearish side, April 2026 MPOB data show Malaysian inventories edging higher again, while exports eased sharply month-on-month. On the supportive side, Indonesia’s B40 mandate and the planned phase-in of B50 from mid‑2026 underpin structural consumption, while hot, humid conditions in key Southeast Asian provinces keep weather risk on the radar. Overall, palm oil looks set to stay volatile but broadly sideways, with dips likely to attract price-sensitive demand.

Prices & Market Sentiment

Recent palm oil futures on Bursa Malaysia have softened from early‑spring highs but remain elevated versus longer-term averages. A recent sector snapshot put the May 2026 contract near MYR 4,480/t; at an indicative rate of 1 EUR ≈ 4.9 MYR, this is roughly EUR 915/t. Nearby mid‑curve 2026 values cluster in the EUR 915–925/t band, consistent with a still-firm but no longer aggressively bullish market.

Compared with mid‑2025, when MDEX front months oscillated mostly between MYR 3,850 and 4,150/t on alternating phases of oversupply and weather anxiety, current prices sit in the upper part of that range, reflecting stronger energy-linked demand and elevated global edible oil costs.

Supply & Demand Balance

Malaysia – stocks rising again: MPOB’s latest April 2026 data show Malaysian palm oil inventories up 1.71% month-on-month to about 2.30 million tonnes, the second consecutive monthly build. Crude palm oil stocks rose modestly to 1.26 million tonnes, while processed oil stocks climbed over 3%. Exports, by contrast, fell sharply by around 14% m/m to 1.30 million tonnes, signaling some demand fatigue at current price levels.

Indonesia – biodiesel anchors demand: Indonesia continues to channel a large share of its output into domestic biodiesel usage under the B40 mandate, with total biodiesel allocation for 2026 estimated around the mid‑teens billion‑litre range. Government plans to shift to a 50% palm-based blend (B50) from July 2026, even if implementation may slip slightly, will further tighten exportable surpluses in coming years and add roughly 1.5 million tonnes of extra palm oil demand annually once fully in place.

Global flows & competition: While India and China remain key buyers, recent MPOB and trade indications suggest exports from Malaysia cooled in April after earlier strength, partly as buyers digested high prices and weighed alternatives such as sunflower and soybean oil. Still, elevated soft oil prices and narrowing spreads in some origins keep palm oil competitive, particularly for price-sensitive food and industrial uses.

Fundamentals & External Drivers

Stocks vs. prices: The combination of rising Malaysian inventories and high outright prices creates a classic push-pull: stocks are no longer at the tight levels seen in early 2025, yet structural demand from biodiesel and stable food consumption prevents any major price collapse. Historical experience from 2025 shows that when Malaysian stocks approached or exceeded ~1.8–2.0 million tonnes, prices tended to stall or correct unless weather threats intensified.

Policy & levies: Indonesia has recently raised export levies on crude palm oil and derivatives, partly to finance the biodiesel subsidy system. Higher levies discourage exports at the margin and may keep more product on the domestic market, but the net effect is to support international CPO prices by tightening seaborne supply and raising import costs for refiners.

Macro & competing oils: The broader oilseed complex remains firm, with soyoil and sunflower oil still historically expensive despite some recent softening. This limits downside for palm oil by preserving its discount and encouraging substitution, especially in industrial and foodservice channels. At the same time, global crude oil has been choppy, tempering—but not eliminating—support for palm-based biodiesel margins.

Weather Outlook in Key Regions

Short-term weather in major Malaysian palm regions such as Sarawak points to very hot, humid conditions with temperatures around 28–32°C and high humidity over the next several days, but without extreme rainfall or typhoon threats.

These conditions are broadly supportive of ongoing harvests and fruit development, though persistent heat can stress trees if accompanied by prolonged rainfall deficits. For now, forecasts do not indicate a major disruptive event, keeping production risks moderate. Weather therefore remains a watch factor rather than an imminent bullish catalyst.

Trading Outlook & Recommendations

• Bias: Sideways to mildly firm. Rising Malaysian stocks argue for limited upside, but strong Indonesian biodiesel demand and still-high competing oil prices underpin a floor.
• For importers / industrial users: Consider layering in coverage on dips towards the equivalent of EUR 890–900/t, as policy-led demand in Indonesia and steady food use should support prices into H2 2026.
• For producers: Use rallies above roughly EUR 930–950/t to extend forward hedging, especially if new MPOB data confirm further stock builds or if exports remain sluggish.
• For traders: Volatility is likely to cluster around monthly MPOB releases and Indonesian policy headlines on B50 timing and export levies; short-term range trades around current levels remain justified.

3‑Day Regional Price Indication (Bursa Malaysia, EUR/t)

In sum, palm oil in May 2026 trades in a fragile equilibrium: inventories are rebuilding, yet robust biodiesel policies in Indonesia and resilient food demand prevent any major downturn. Weather and policy signals will be decisive for the next breakout from the current range.