Southeast Asia Palm Oil Weekly: Strong Post-Holiday Rally, Policy & Weather in FocusSoutheast Asia Palm Oil Weekly: Strong Post-Holiday Rally, Policy & Weather in Focus

📊 Key Takeaways

• Futures surge – BMD benchmark up 1.43% to RM4,600, front-month up 2% to RM4,624

• Indonesia export controls – State-owned DSI export agency launch to reshape pricing

• El Niño risk – WMO sees 80% chance of formation June–August, affecting long‑term yields

• B15 live + B50 countdown – Malaysia implements B15; Indonesia to roll out B50 in July

• Spot steady to firm – 24° refined palm oil FOB at $1,170/tonne, forward premiums widen

Dear palm oil community in Southeast Asia,

After the long holiday weekend (King’s birthday & Wesak Day substitute holiday), BMD crude palm oil futures opened higher today. By midday, the benchmark August 2026 CPO contract rose RM65 or 1.43% to RM4,600/tonne (~US$1,155.3), trading between RM4,589–4,620. The front-month continued its gains in the afternoon, closing 2% higher at RM4,624/tonne. During the holiday, Brent crude gained 5.4% while Chicago soybean oil rose 0.9%. This morning crude extended gains by nearly 1% to a one‑week high.

On the physical front, Asian palm oil prices rose for a second consecutive week in the last week of May. As of 29 May, June-delivery 24° refined palm oil was quoted at US$1,170/tonne (FOB Malaysia ports), July at $1,180, Oct–Dec at $1,205, and forward Jan–Mar 2027 at $1,222.5/tonne. The widening premium for forward months signals tightening supply/demand expectations for the second half of the year.

📈 1. Market analysis

Today’s post‑holiday price jump is driven by three factors: higher international energy prices + producer policy expectations + seasonal supply tightness.

Last Friday (the last trading day before the holiday), the BMD August CPO contract closed at RM4,535/tonne. Today’s gap‑up opening reflects positive cues from overseas markets during the break. Renewed Middle East tensions and stalled US‑Iran negotiations have repriced supply risks near the Strait of Hormuz. Higher oil prices encourage palm oil producers to accelerate biofuel blending to reduce energy import bills.

The futures curve remains in contango. As of Friday’s close, June was at RM4,470/tonne and November at RM4,620, a RM150 premium. This suggests strong near‑term supply concerns, while far‑month contracts also price in potential El Niño impacts later this year.

On the Dalian exchange today, September soyoil fell RMB14 to RMB8,555/tonne, September palm oil fell RMB32 to RMB9,692/tonne. CBOT soyoil rose 0.61¢ to 79.02¢/lb, and Brent crude rose US$0.75 to US$96.75/barrel.

📋 2. Origin supply & demand

🇮🇩 Indonesia: Output dips but exports collapse, stocks build

GAPKI data: March 2026 CPO production was 4.403 million tonnes, down 12.22% from 5.015 million in February. Q1 total palm oil output (incl. palm kernel oil) was 15.558 million tonnes, still up 18.4% y/y.

Domestic consumption in March totalled 2.115 million tonnes (-8.25% m/m): biodiesel 1.056 million (-7.71%), food 0.897 million (-9.03%), oleochemicals 0.162 million (-7.43%).

Most striking: March palm oil exports plunged to 2.168 million tonnes, a 34.25% drop from 3.297 million in February. CPO exports collapsed from 0.395 million to just 96,000 tonnes. Almost all major buyers reduced offtake – China -0.314 million, India -0.291 million, Pakistan -0.113 million.

With exports falling and domestic use lower, end‑March Indonesian palm oil stocks rose to 2.568 million tonnes, up 26.8% from 2.026 million in February and 27.3% higher y/y. Short‑term data look weak, but the market is focused on longer‑term variables.

🇲🇾 Malaysia: Exports ease m/m but strong y/y

In the first four months of 2026, Malaysia’s palm oil exports totalled 5.38 million tonnes, up 25.5% y/y – the highest for that period since 2019. However, April exports fell 14.3% m/m to 1.30 million tonnes, still representing 80% of monthly production – solid absorption capacity.

High‑frequency May data show weaker exports: ITS estimated Malaysian palm oil exports at 1.2809 million tonnes in May, down 9.8% from April. Production is also soft – SPPOMA estimates a 11.38% m/m output drop in 1–20 May, a picture of both weak supply and demand.

MPOB previously forecast that with support from global biofuel policies, June CPO prices would find solid support near RM4,400/tonne. Actual prices are currently stronger.

🌍 Production outlook & El Niño threat

The World Meteorological Organization (WMO) said Tuesday there is an 80% chance of El Niño forming between June and August, and a 90% chance it persists through November. For oil palms, drought effects typically take 6–12 months to show up in output data. Malaysia’s meteorological department has confirmed El Niño conditions will begin in June–July 2026 and could last into early 2027. This implies potential supply‑side shocks from late 2026 onward.

MPOB has warned that with unresolved geopolitical tensions and rising El Niño risk, supply risks remain, adding uncertainty to the next season’s global vegetable oil supply.

🔍 3. Policy & industry news

🇲🇾 Malaysia B15 goes live

From 1 June, Malaysia has officially implemented B15 biodiesel across the nation – 15% palm‑based biodiesel blended into conventional diesel. The programme is included in the subsidised rollout for Negeri Sembilan, Selangor, Perlis and others. While the absolute incremental consumption of palm oil from B15 is modest, its symbolic importance is that producer policy is shifting from “decarbonisation” to “energy security first”. That will gradually affect cost expectations for importers and processors.

🇮🇩 Indonesia B50 in July + export overhaul

Energy and Mineral Resources Minister Bahlil Lahadalia confirmed on 6 April that the B50 policy will take effect on 1 July 2026 – 50% palm‑based biodiesel in diesel. After a brief postponement earlier in January, the government has decided to proceed. GAPKI estimates B50 will require around 16 million tonnes of CPO per year, an increase of about 3 million tonnes from ~13 million tonnes under B40. Testing shows B50 increases fuel consumption by about 3.12% compared to B40, but it has passed nearly 1,000 hours of operation in heavy mining equipment – technically ready.

Even more noteworthy is Indonesia’s deep export system overhaul: Between June and August, exporters must report palm oil and refined palm oil export transactions to a state agency. From 1 September, the state‑owned DSI (Daya Suplai Indonesia) will centrally handle trading, contracts, shipments and payments. The market fears this will materially disrupt pricing mechanisms and export supply. As the world’s largest palm oil producer, any change to Indonesia’s export management can have wide‑ranging effects on prices, currency stability and foreign reserves.

Separately, Indonesia is investigating 20 exporters suspected of under‑invoicing, focused on 10 large CPO companies – this also supports sentiment in the near term.

🇪🇺 EUDR countdown

For exporters to the EU, the EU Deforestation Regulation (EUDR) will apply to large companies from 30 December 2026, and to SMEs from 30 June 2027. It requires traceability and due diligence statements showing that palm oil products come from deforestation‑free land. Worth noting: the European Commission introduced a simplification package on 4 May, proposing to exclude leather and adjust certain palm oil derivatives – which could cut compliance costs by up to 75%.

For Chinese and Southeast Asian palm oil exporters, building an EUDR‑compliant traceability system is now a matter of urgency – less than seven months before the deadline for large operators. Supply chain management and certification preparation time is tight.

💎 4. Outlook & summary

The Southeast Asian palm oil market is currently seeing a dense cluster of short‑term bullish drivers:

• Indonesia’s export controls are imminent, adding upside risk premium due to near‑term export uncertainty;

• Middle East tensions push oil prices higher, reinforcing the energy‑linked value of vegetable oils;

• Malaysia’s B15 launch and Indonesia’s B50 countdown provide policy‑backed growth in domestic consumption;

• El Niño expectations continue to build, tightening longer‑term supply forecasts.

Looking ahead, MPOB expects that inventory will not build significantly during the peak production season in Southeast Asia, because more Indonesian palm oil will be diverted to domestic energy use. Technically, the RM4,500/tonne level on BMD has become strong support; analysts had previously seen resistance near RM4,680. However, three downside risks warrant attention: (1) the EU’s anti‑circumvention investigation into biodiesel from China and Southeast Asia; (2) a sharp reversal in crude oil prices would undermine the premium for palm oil; (3) downstream demand may struggle to absorb high prices.

Industry players should closely monitor: the actual implementation of B50 in July, how the DSI export mechanism functions, and the evolution of El Niño intensity. The tight global vegetable oil balance remains intact, but short‑term volatility is likely to increase further.

Disclaimer: The above is for informational purposes only and does not constitute investment advice. Market risks apply; invest prudently.

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