Analysts expect crude palm oil prices to remain above RM4,000 per metric ton through the end of 2026, supported by supply risks, El Niño concerns, geopolitical tensions and Indonesia’s B50 biodiesel mandate.
PALMOILMAGAZINE, KUALA LUMPUR — Crude palm oil (CPO) prices are expected to remain firm in the second half of 2026, with growing geopolitical risks, strengthening El Niño conditions and robust biodiesel demand providing potential support for prices and palm oil plantation stocks.
According to The Edge Malaysia, cited by PalmOilMagazine on Wednesday, August 26, 2026, several analysts expect CPO prices to stay above RM4,000 per metric ton through year-end, despite continued concerns over elevated palm oil inventories in Malaysia.
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CIMB Securities expects CPO prices to trade between RM4,400 and RM4,600 per ton in the near term. The forecast is supported by rising geopolitical risks, potential El Niño-related production disruptions and stronger palm oil demand from Indonesia’s biodiesel program.
CIMB said disruptions to commodity shipments from Russia and Ukraine could reduce global sunflower oil supplies. This could encourage consumers to switch to palm oil as an alternative vegetable oil.
Demand prospects are also expected to receive a boost from India’s upcoming festive season. Increased consumption during the period could lift demand for cooking oil and other vegetable oil products.
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El Niño Raises Concerns Over Palm Oil Production
Weather conditions remain a key factor in the CPO price outlook. CIMB expects strengthening El Niño conditions, which could begin to have an impact from October, to put pressure on palm oil productivity and production in Southeast Asia.
However, the most significant impact on supply is expected to emerge in 2027. This is due to the time lag between weather stress and its eventual impact on fresh fruit bunch production and palm oil output.
Against this backdrop, CIMB raised its average CPO price forecasts for 2026 and 2027 by RM50 per ton each. Its 2026 estimate now stands at RM4,450 per ton, while the 2027 forecast has been raised to RM4,550 per ton.
The revisions reflect increased supply risks from El Niño as well as continued geopolitical uncertainty.
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Indonesia’s B50 Program Supports CPO Demand
On the demand side, Indonesia’s mandatory B50 biodiesel program is expected to provide additional support for CPO consumption. The program could increase domestic palm oil absorption and tighten supplies available for the global market.
The outlook is further supported by a revision to Indonesia’s palm oil production forecast. The US Department of Agriculture (USDA) lowered its estimate for Indonesia’s 2026/27 palm oil production to 47.2 million tons, taking potential dry conditions into consideration.
Indonesia’s palm oil inventories are also projected to decline. Stocks are expected to fall by around 28% year on year to 3.1 million tons, potentially supporting a tighter balance in the global palm oil market.
Meanwhile, Public Investment Bank expects average CPO prices to remain around RM4,400 per ton during 2026–2027.
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High Malaysian Inventories Remain a Headwind
Despite the positive price outlook, further gains could be constrained by elevated palm oil inventories in Malaysia.
TA Securities reported that Malaysian palm oil stocks reached 2.63 million tons in July, exceeding market expectations. High inventories could limit CPO price gains in the near term.
According to TA Securities, the increase in stocks was primarily driven by higher production and lower domestic consumption, which outweighed improvements in export performance.
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On an annual basis, palm oil inventories increased 24.3%, while exports rose 4.8%. Meanwhile, production, domestic consumption and imports declined by 1.1%, 19.5% and 6.9%, respectively.
TA Securities maintained its average CPO price assumption at RM4,300 per ton for 2026.
With weather risks, geopolitical uncertainty, Indonesia’s biodiesel mandate and changing inventory levels in Malaysia all influencing the market, CPO prices in the second half of 2026 are expected to remain highly sensitive to shifts in global supply and demand. (P2)
