Lang
Malaysia’s palm oil stocks are expected to remain elevated in the near term amid weak exports and seasonal production trends.
HLIB Research noted that palm oil stocks rose for the sixth consecutive month, increasing by 13% month on month to 2.84 million tonnes in November.
This came despite a 5.3% month-on-month decline in production to 1.94 million tonnes, as the sharp drop in exports, down 28.1% month on month to 1.21 million tonnes, outweighed lower production and steady domestic consumption.
HLIB Research said the export decline was mainly due to the absence of festive-driven restocking and seasonally weaker demand from buyers in colder regions.
Citing surveyors Intertek Services, the research house said palm oil shipments to Africa, Europe, and India were particularly weak. Amspec also reported an additional 10.3% month-on-month fall in exports during the first ten days of this month.
The research firm said inventories may have peaked in November, but warned that any stock drawdown is likely to be gradual. It noted that stock levels are likely to decline only gradually over the next few months, as palm oil demand is typically weaker from November to February.
HLIB Research said crude palm oil (CPO) prices had fallen by around 10% since the end of October, bringing the year-to-date average to RM4,318 per tonne.
The firm maintained its CPO price assumptions at RM4,300 and RM4,200 per tonne for this year and next year, respectively, and kept its overweight recommendation on the plantation sector.
Its top stock picks are SD Guthrie Bhd, supported by expansion into renewable energy and industrial property, an improving balance sheet, and a dividend yield of 3% to 4%; and Hap Seng Plantations Bhd, due to its net cash position and strong leverage to CPO prices.
Meanwhile, TA Research noted that while palm oil production fell by 5.3% month on month in November, output remained 19.4% higher year on year.
Year to date, CPO prices have fallen by 16.2% to around RM4,036 per tonne, weighed down by higher supply.
The research firm said strong production in both Malaysia and Indonesia pushed stocks higher, while global demand remained weak and export growth slowed.
TA Research added that broader edible oil sentiment has also been hurt by the bearish soybean outlook.
It said prices of competing edible oils were also declining, while weakness in crude oil reduced palm oil’s appeal as a biofuel feedstock, adding further pressure on prices.
The firm noted that soybean futures slipped below $11 per bushel to around $10.85, as uncertainty over Chinese demand continued to weigh on sentiment despite China resuming agricultural purchases from the United States.
It said actual Chinese buying, estimated at about three million tonnes, remained far below the 12 million tonnes expected by US officials. This slower-than-expected demand continues to undermine market sentiment.
However, TA Research expects seasonal supply disruptions linked to the monsoon and stable festive-season demand to provide some support to CPO prices in the first quarter of next year.
The firm maintained its neutral rating on the sector, expecting average CPO prices at RM4,000 per tonne next year. It cited higher global production, weak demand from China and India, and increased competition from recovering soybean, sunflower, and rapeseed oil supplies.
It added that while yields should improve, weaker prices may limit upstream margins.
CIMB Research, meanwhile, expects Malaysian palm oil stocks to rise by 3% month on month to 2.93 million tonnes this month, as a slight recovery in exports is unlikely to offset production volume. It expects production to fall by 11% month on month to 1.72 million tonnes this month.
The firm noted that average CPO prices fell by 7.3% month on month to RM4,089 per tonne in November. Recent weakness, including spot prices around RM4,029, reflects concerns over Indonesia’s biodiesel policy, high Malaysian stocks, uncertainty over US biofuel policy, and buyer caution amid elevated inventories.
The firm said higher-than-expected stocks are likely to cap CPO prices until exports strengthen meaningfully or clearer policy progress emerges on biodiesel use in the United States and Indonesia.
CIMB Research said the recent price decline pushed palm oil to a slight discount against alternatives such as soybean, rapeseed, and sunflower oils, which could help support exports.
It concluded: “Given our expectations of slower production in the first quarter of 2026 due to seasonal factors, we believe prices will remain supported above RM4,000 per tonne. We maintain our average CPO price forecast at RM4,200 per tonne for next year,” while keeping its overweight recommendation on the sector.
Source: The Star