PALMOILMAGAZINE, KUALA LUMPUR – Global palm oil market prospects are expected to remain constructive in the second half of 2026, with crude palm oil (CPO) prices projected to stay at relatively elevated levels amid tightening supply conditions and increasing weather-related risks.
The Malaysian Palm Oil Council (MPOC) forecasts CPO prices to trade between RM4,400 and RM4,650 per ton throughout July 2026. The outlook is supported by expectations of tighter exportable supplies from Indonesia, rising domestic biodiesel demand, and the potential impact of El Niño on regional production.
As quoted by Palmoilmagazine.com from an official statement by MPOC on Monday (June 22, 2026), current market developments indicate a fundamental shift in the balance of global vegetable oil supply and demand, which could provide additional support to palm oil prices in the coming months.
Also Read: Malaysian CPO Hits Seven-Week High on Strong Export Demand and Vegetable Oil Rally
Malaysia’s palm oil production declined by 6.9 percent month-on-month in May 2026 to 1.51 million tons. The decrease was largely attributed to a temporary biological rest period following a strong production cycle that lasted from October 2025 through March 2026.
The council also noted that fewer harvesting days due to two national public holidays in May contributed to the monthly production decline.
On the trade side, Malaysian palm oil exports slowed during May, a development that had largely been anticipated following weaker purchasing activity in March and April amid heightened price volatility.
Also Read: KPBN CPO Offers Rise to IDR15,415/kg as Malaysian Palm Oil Continues Higher
Despite the softer monthly performance, cumulative exports during the January–May 2026 period remained strong. Total shipments increased by approximately 783,000 tons, or 13.8 percent, compared with the same period last year.
India, Kenya, and Vietnam were the primary contributors to the increase, accounting for nearly 749,000 tons of additional export demand.
Africa and ASEAN Emerging as Key Markets
MPOC highlighted the growing importance of Sub-Saharan Africa and ASEAN as strategic markets for Malaysian palm oil. During the first five months of 2026, the two regions absorbed around 36 percent of Malaysia’s total palm oil exports.
This represents a significant increase compared with approximately 25 percent recorded five years ago, reflecting Malaysia’s success in diversifying its export markets amid intense competition in the global vegetable oil sector.
Also Read: Strong El Niño Threatens Global Palm Oil Output, CPO Prices Expected to Strengthen
Indonesian Supply Expected to Tighten
The council expects exportable palm oil supplies from Indonesia to become increasingly constrained toward the end of the third quarter and into the fourth quarter of 2026.
Several factors are contributing to this outlook, including the implementation of Indonesia’s B50 biodiesel mandate beginning in July 2026, relatively stagnant production growth, and rising domestic consumption.
According to Oil World estimates, Indonesian palm oil production is expected to remain largely unchanged at around 49.4 million tons in 2026. However, combined domestic consumption and exports increased by approximately 2.2 million tons, or 15 percent, during the first four months of the year.
The tightening supply outlook may encourage international buyers to shift a larger portion of their purchases to Malaysia in search of more stable supply availability.
MPOC also warned that higher fertilizer prices resulting from geopolitical tensions involving the United States and Iran could affect fertilizer application among oil palm growers in both Indonesia and Malaysia. Any impact on productivity would likely become visible several months later.
Also Read: Indonesia Strengthens Global Seed Leadership with 10,500 Oil Palm Germplasm Exports to Colombia
El Niño Risks Could Support Prices
Looking ahead, MPOC identified the growing risk of El Niño as one of the key factors likely to support palm oil prices.
Although plantations in Malaysia and Indonesia had not experienced significant weather impacts through June, the probability of a stronger El Niño event developing during July or August has increased.
Also Read: Jambi Palm Oil FFB Prices for June 19–25, 2026 Remain Stable with Minimal Movement
Such conditions could reduce rainfall and create drier weather across Southeast Asia, Australia, and India. However, the effects on oil palm production typically emerge with a lag of approximately nine to twelve months.
At the same time, MPOC cautioned that further price gains may be limited by high vegetable oil inventories in major importing countries.
India’s vegetable oil inventories reached approximately 2.2 million tons in May, the highest level in 17 months. Meanwhile, vegetable oil stocks in China approached 2 million tons, marking the highest level recorded in 2026.
Also Read: Riau Independent Smallholder FFB Prices Inch Up to IDR 3,696/kg in Mid-June 2026
In addition, biodiesel economics have become less attractive as gasoil prices have fallen below palm oil futures prices, reducing the competitiveness of CPO as a biofuel feedstock.
Taking these factors into account, MPOC expects CPO prices to remain relatively strong throughout July, although the pace of any further gains may be moderated by abundant global vegetable oil inventories. (P2)
