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Data released by the Malaysian Palm Oil Board (MPOB) for May 2026 painted a picture of a market grappling with softening demand and reduced production, with the combined effect driving a notable build-up in inventory levels.
Malaysian crude palm oil production in May declined by an estimated 5-7% compared to the same month last year, reflecting the impact of seasonal weather patterns and ongoing concerns about tree stress in key growing regions. The output reduction came at an inopportune time as export demand also weakened.
Total exports of Malaysian palm oil products fell sharply in May, with the decline attributed to a combination of factors including the lingering effect of high palm oil prices relative to competing vegetable oils, reduced buying interest from key markets including China and India, and growing uncertainty among international buyers about Indonesian supply availability following the new export policy announcement.
As a result of the twin pressures of lower production and reduced exports, end-of-month palm oil inventories in Malaysia rose to their highest level in several months, a development that is expected to weigh on prices in the near term.
Analysts noted that the inventory build is a bearish signal for CPO futures, but cautioned that the magnitude of the price impact would depend heavily on developments in Indonesia's export policy situation and the trajectory of global vegetable oil demand in the months ahead.
