PALMOILMAGAZINE, KUALA LUMPUR — Several investment banks expect crude palm oil (CPO) prices to remain elevated throughout 2026, supported by growing biodiesel demand and the possibility of a strong El Nino event that could disrupt regional palm oil production.
In its latest research report, Kenanga Investment Bank Bhd projected CPO prices to trade between RM4,250 and RM4,350 per ton during 2026. Plantation companies are also expected to face rising fertilizer and energy costs starting in the second half of the year.
Despite higher operating expenses, the plantation sector is still viewed as one of the key beneficiaries of geopolitical tensions in West Asia, which have pushed up global vegetable oil and energy prices.
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CPO prices have climbed significantly from RM4,019 per ton in January to RM4,568 per ton in April 2026. The increase has been driven by steady demand growth of around 3% to 4%, alongside rising consumption from palm-based biodiesel programs.
Quoted by Palmoilmagazine.com from Bernama on Thursday (May 14, 2026), Kenanga IB said the likelihood of CPO prices remaining firm through the first half of 2026 and extending into the 2027 financial year is increasing due to the growing risk of a very strong El Nino event.
“Historically, El Nino has not had a major impact on oil palm productivity, even under strong conditions. However, a very strong El Nino could disrupt the flowering phase, affecting fresh fruit bunch (FFB) production in the following season,” the report stated.
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The research house also noted that Indonesia has historically been more resilient to severe El Nino conditions than Malaysia, likely due to its younger tree profile and wider plantation distribution.
According to Kenanga IB’s analysis, a very strong El Nino could reduce regional palm oil production by 2% to 9% in the following year, potentially driving an additional 5% to 10% increase in CPO prices.
Based on that outlook, the bank maintained its “overweight” recommendation on the plantation sector, assuming an average CPO price of RM4,250 per ton in 2026 and RM4,200 per ton in 2027.
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Meanwhile, Hong Leong Investment Bank Bhd also maintained its 2026 CPO price forecast at RM4,350 per ton. For the longer term starting in 2027, the bank expects prices to remain around RM4,200 per ton.
“We maintain an overweight view on the sector, supported by stronger short-term CPO prices due to elevated global crude oil prices,” the report stated.
However, Hong Leong IB cautioned that the current bullish cycle may only persist during the early stages, while medium-term risks could emerge from supply adjustments among competing vegetable oils in the global market. (P2)
