Lang
Analysts say crude palm oil (CPO) prices, which hit a record average of RM5,087 a tonne in 2022, have eased since then but remain well above historical levels.
CIMB Securities expects prices to hold steady in the near term, averaging around RM4,330 a tonne in FY2025. The brokerage attributed this resilience to slowing supply growth amid replanting cycles, limited new investment, persistent labour shortages and adverse weather conditions. Demand is also being bolstered by expanding biodiesel production in Indonesia, particularly with the rollout of the mandatory B40 blend in FY2025.
"We assume Malaysian CPO prices will average RM4,200-4,286 a tonne for FY2026-2028, supported by a tight global edible oils balance, slowing new oil palm planting, and continued structural demand from Indonesia's biodiesel programme. This compares with the average CPO price of RM4,366 a tonne achieved in FY2025," the brokerage said.
Palm kernel (PK) prices are expected to average RM2,940-3,000 a tonne for FY2026-2028, slightly below the FY2025 average of RM3,050 a tonne, supported by stable demand for laurel oil and improving oleochemical margins. The firm also maintained a discount of RM500 a tonne for Indonesian CPO relative to Malaysian prices to account for export levies and costs, translating into a blended average of RM3,982-4,069 a tonne for UMB across FY2026-2028.
Glenauk Economics similarly expects CPO prices to remain steady at RM4,300-4,600 a tonne in the first half of 2026, supported by a delayed peak production season, with output declines only expected by December 2025 and January 2026.
Citing Glenauk's report, CIMB Securities added that heavy rainfall across the northern Malaysian peninsula could further pressure fresh fruit bunch yields by restricting access to plantations and disrupting harvesting activities.
While biodiesel policy adjustments in Indonesia may cause short-term volatility, Glenauk said palm oil fundamentals remain strong. It expects 2026 output to rise 3 per cent in Indonesia and 1 per cent in Malaysia, with Malaysian production reaching between 19.6 million and 19.8 million tonnes, slightly below market expectations of 20 million tonnes.
CIMB Securities expects CPO prices to remain elevated at around RM4,200 a tonne, supported by Indonesia's plan to roll out a B45-B50 biodiesel blend by mid-2026, slowing production growth due to replanting and plantation seizures, persistent labour shortages, and potential weather disruptions linked to a developing La Nina pattern.
Despite volatility earlier in the year, both firms agree that palm oil fundamentals remain solid, underpinned by steady demand from the biofuel and food sectors, restocking in emerging markets, and disciplined supply management across Malaysia and Indonesia.
Overall, the research houses expect CPO to stay within a range of RM4,000-4,500 into early 2026, driven by continued biodiesel commitments, limited expansion in planted area, and potential weather risks linked to lingering La Nina effects.
Crude Palm Oil Trades In Wide Range Amid Supply Shifts And Biodiesel OptimismCPO prices moved within a wide range of RM3,880-4,760 a tonne in the first nine months of 2025, reflecting a year marked by supply volatility, policy shifts and strong biodiesel-linked demand optimism.
After a weak first half weighed down by swelling stocks and trade tensions, prices regained momentum from mid-year, supported by Indonesia's push to expand biodiesel production, strong restocking demand and expectations of tighter seasonal output. Despite record stocks by September, market sentiment remained resilient, with CPO prices staying above RM4,000 a tonne as the final quarter approached.
Weak Start: Weather And Trade Pressures Weigh On PricesCPO prices began 2025 on a softer footing. In January, prices fell 9 per cent month-on-month to RM4,672.50 a tonne despite Malaysian palm oil stocks falling 7.5 per cent month-on-month to a 20-month low of 1.58 million tonnes. Heavy rain in Pahang, Johor, Sabah and Sarawak disrupted harvesting, limiting supply. However, a wide price premium over soybean oil raised concerns about substitution, while an elevated POGO (palm oil-gas oil) spread of around US$430 a tonne weakened the outlook for biodiesel demand.In February, prices recovered modestly by 1.8 per cent month-on-month to RM4,759 a tonne as stocks continued falling to a 22-month low of 1.51 million tonnes. Output fell 4 per cent month-on-month due to persistent rain in Sabah, while domestic consumption rose 12 per cent. However, exports fell 14 per cent month-on-month, weighed down by palm oil's continued premium over competing oils.
March-April: Stock Rebuilding Sparks CorrectionMarch saw the first stock increase in six months, with inventories rising 3.5 per cent month-on-month to 1.56 million tonnes. Output rebounded 17 per cent month-on-month amid improving weather, while domestic disappearance jumped 37 per cent month-on-month to 450,000 tonnes after the Malaysian Palm Oil Board (MPOB) included oil extracted from empty fruit bunches (EFB) and sterilised condensate in its production data. Despite higher output, prices slipped slightly by 0.4 per cent month-on-month to RM4,740 a tonne, weighed down by higher imports.The market turned sharply bearish in April as stocks jumped 19 per cent month-on-month to 1.87 million tonnes, driven by a 22 per cent rise in output to 1.69 million tonnes. CPO prices fell 8.9 per cent month-on-month to RM4,319.50 a tonne amid swelling inventories and renewed trade tensions following the United States' announcement of higher import tariffs on 2 April and escalating US-China frictions.
May-June: Prices Break Below RM4,000, Then Stabilise On Policy SupportThe downward trend extended into May, with CPO prices falling 10 per cent month-on-month to RM3,880 a tonne, below RM4,000 for the first time in 2025, as stocks rose to an eight-month high of 1.99 million tonnes. This decline came despite positive policy developments: India halved import duties on palm oil (effective 30 May), while Indonesia raised export levies (effective 17 May) to fund biodiesel subsidies and replanting. However, rising stocks and tariff uncertainty kept sentiment weak.In June, stocks surpassed the 2-million-tonne mark as exports fell 10.5 per cent month-on-month. Nonetheless, prices edged up 2.2 per cent month-on-month to RM3,969 a tonne, supported by optimism after the US extended the 45Z clean fuel production credit, which lifted the broader vegetable oil complex.
July-September: Biodiesel Momentum Drives RecoveryFrom July onwards, CPO prices rose for four consecutive months, buoyed by biodiesel momentum and pre-tariff buying.In July, prices rose 3.6 per cent month-on-month to RM4,112.50 a tonne, even as stocks reached 2.11 million tonnes. Market sentiment improved on Indonesia's plan to raise its biodiesel blend to 50 per cent (B50) by 2026, and ahead of the US "reciprocal tariffs" that took effect on 8 August.The uptrend continued in August, with prices rising 5.2 per cent month-on-month to RM4,329 a tonne despite stocks climbing to a 20-month high of 2.20 million tonnes. Domestic disappearance rose to a record 491,000 tonnes (+97 per cent year-on-year), reflecting increased use of oil derived from empty fruit bunches and sterilised condensate. Expectations of tighter seasonal output added further support.By September, Malaysian palm oil stocks rose to 2.36 million tonnes as domestic disappearance normalised (-33 per cent month-on-month). Nonetheless, prices rose a further 1 per cent month-on-month to RM4,371.50 a tonne — a fourth consecutive monthly gain — driven by higher exports to India, the Middle East and the United States, alongside Indonesia's reaffirmed commitment to the B50 biodiesel blend by mid-2026.
Source: New Straits Times