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KUALA LUMPUR – The Malaysian Palm Oil Council (MPOC) anticipates crude palm oil (CPO) prices to maintain a firm stance above RM4,600 per tonne throughout September. This outlook is primarily attributed to tightening supply fundamentals and ongoing geopolitical disruptions impacting global trade flows.
Further underscoring market concerns, crude palm oil futures (FCPO) forward contracts for 2027, traded on Bursa Malaysia Derivatives (BMD), exceeded RM5,000 per tonne by mid-August. This signals apprehension regarding the potential effects of the El Niño weather phenomenon. Additionally, the MPOC noted in a recent statement that Indonesia’s demand for B50 biodiesel blending is poised to strengthen as the three-month transition period to deplete remaining B40 biodiesel stocks concludes in September.
In terms of production, Malaysia saw an increase of 9.4% month-on-month in July 2026, reaching 1.79 million tonnes – a rise of 154,000 tonnes. However, production levels for July 2026 remained below those of the previous year, marking the fifth consecutive month of year-on-year decline since March 2026. Export performance, conversely, showed significant improvement in July, climbing by 14.5% month-on-month to 1.39 million tonnes. This boost was largely fueled by robust buying from India in anticipation of Diwali, coupled with sustained strong demand from the Sub-Saharan Africa region.
Despite an increase in Malaysian palm oil stocks to 2.62 million tonnes in July, the MPOC stated that this build-up is 'not a major concern'. This is attributed to strong biodiesel demand and proactive export loading in Indonesia, which have kept Indonesian palm oil stocks relatively low. The price rally observed after the Malaysian Palm Oil Board (MPOB) released its supply and demand data on August 10 further supported the view that current stock levels are not excessive, even if overall supply remains comfortable for the time being.
The global vegetable oil market continued to find support in August from biofuel demand and geopolitical uncertainty, with palm oil registering the most significant gains. Malaysian crude palm oil prices advanced by 3.9% during the month. In comparison, sunflower oil prices saw a 2.7% increase, and soybean oil in Argentina rose by 1.1%. Rapeseed oil prices in Europe, however, experienced a marginal decline of 0.8%.
Malaysia’s palm oil production typically reaches its peak in September or October before entering a seasonal decline in the fourth quarter. Production growth during the first seven months of 2026 was largely supported by an improved oil extraction rate (OER) from fresh fruit bunches (FFB). While Malaysia’s OER from January to May 2026 was notably above its 10-year average, a benefit of favorable rainfall six months prior, it dipped below the 10-year average in June and July 2026 and is projected to remain so for the remainder of the year. This anticipated easing of OER from earlier highs, combined with the seasonal downtrend, suggests a year-on-year decline in palm oil production in Q4 2026, leading to tighter supply towards the year-end.
Ongoing geopolitical disruptions continue to reshape global vegetable oil trade flows. These include significant disruptions to Red Sea shipping, reduced traffic through the Strait of Hormuz, and suspended operations at Black Sea ports, which are tightening sunflower oil supplies. Such shifts are redirecting major importers, notably India, towards palm oil, with July imports surging 49.8% month-on-month, while sunflower oil growth lagged at just 3.6%. Supportive biodiesel economics, particularly in Indonesia where CPO remains competitively priced relative to gasoil, further bolster blending demand and margins. However, potential downside risks include an easing of Black Sea bottlenecks, the arrival of new sunflower crops, or a drop in energy prices if geopolitical conditions improve. Source: klsescreener.com