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The Malaysian Palm Oil Council (MPOC) projects crude palm oil (CPO) prices to remain above RM4,700 per tonne through at least October, and potentially for the remainder of 2026, according to a council statement released on Tuesday.
MPOC reported that palm oil production continues to lag 2025 levels, marking the sixth consecutive month of year-on-year contraction since March 2026. Despite this downward trend, August output edged up by 1.4% compared with the previous month.
On the demand side, exports declined by 7.5% month-on-month, weighed down by weaker shipments to South Asian and Middle Eastern destinations. However, full-year export volumes are still forecast to reach 16 million tonnes, representing a 5.2% increase over 2025's tally.
The combination of rising output and softer exports pushed palm oil inventories up to 2.8 million tonnes in August. MPOC described the elevated stock level as likely temporary, citing projections that production and stockpiles in both Malaysia and Indonesia will ease in the coming months.
The council attributed the anticipated tightening to a mix of environmental and geopolitical factors. Dry conditions linked to El Niño continue to threaten output, while disruptions in energy markets stemming from the ongoing US-Iran conflict have lifted biofuel demand and supported palm oil prices.
'Exports are projected to remain stable at around 16 million tonnes in 2027. As a result, Malaysia is expected to play an increasingly important role in supplying oil to global consumers. The current high stock level is therefore likely to be temporary,' MPOC said in the release.
Looking at the global outlook, the council highlighted that consumption of major vegetable oils is forecast to climb by 6.1 million tonnes next year, outpacing the projected 3.1 million-tonne rise in total production. Independent analyst Oil World projects Indonesia's 2027 palm oil output to fall by 1.9 million tonnes and Malaysia's by 0.7 million tonnes.
MPOC flagged two main downside risks to CPO prices: a potential easing in energy prices and seasonal inventory build-up as production approaches its seasonal peak in September or October.
Source: The Edge Malaysia