Right now, the front of the palm oil curve is heavy with supply, pulling nearby contracts lower in Kuala Lumpur. Further out, prices are firmer as traders brace for a tighter setup. On Tuesday, January traded about 420 ringgit per ton under July, a sharp shift from near parity a couple of months back. Kaleesuwari Intercontinental Ltd's Gnanasekar Thiagarajan, who oversees trading and hedging strategies, said, "It's very unusual to have such a wide spread," adding that many expect this year's surplus to flip to a deficit next year.
Malaysia's production has outpaced forecasts, and with exports sluggish, stockpiles have swelled to a record. El Niño's drag on palm yields typically shows up with a 12 to 24 month delay. Parts of Indonesia, the top producer, are experiencing marked dryness, and fires have burned across large areas of Sumatra and Kalimantan, sending haze throughout the region. According to Thomas Mielke of Oil World, the severe El Niño is likely to curb palm output during the next two years.
Commodity markets can be oversupplied now and tight a year later. Market Briefs covers that cycle free every weekday.
This year, Indonesia increased the stringency of its biodiesel mandate, and the nation's B50 requirement retains a larger share of palm oil domestically. Looking ahead, the US Department of Agriculture projects Indonesia's palm exports will sink to a 14-year low in 2026-27, with softer-than-expected production also tightening supplies. Speaking at an industry conference in Mumbai, veteran trader Dorab Mistry said that in 2026-27, the global supply of palm oil could decline by 2.5 million tons, undoing a 1.5 million ton rise from the preceding year.
CGS International Futures' Chandran Sinnasamy added that shipments from Malaysia have started to accelerate, shifting focus to the pace at which the oversupply could be whittled down and to whether monthly output has already topped out. If your grocery bill or a company you hold is tied to edible oils, this split screen is a heads-up that today's discount might not last.
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