Palm oil climbed to its highest level in about 20 months, driven by rising biofuel demand and mounting production risks from the strengthening El Niño weather pattern. The rally reflects tightening global vegetable oil supplies as major producers in Southeast Asia face potential yield reductions.

Futures in Kuala Lumpur extended gains, with benchmark contracts approaching levels last seen in early 2024. Traders are closely monitoring weather forecasts for Malaysia and Indonesia, which account for roughly 85% of world output, as El Niño typically brings drier conditions that stress oil palm trees.

Meanwhile, government mandates for biodiesel blending in key consuming nations — including Indonesia's B35 program and similar policies in Europe — continue to anchor structural demand. The convergence of policy-driven consumption and climate-related supply uncertainty has created a bullish backdrop that could sustain prices through the first half of the year.