El Nino, biodiesel demand support CPO prices despite rising stocks
KUALA LUMPUR: Malaysia’s palm oil inventories rose to a five-month high in July as stronger production outpaced exports, but research firms expect crude palm oil (CPO) prices to remain firm in the second half of 2026 amid growing concerns over El Nino and tighter global supply.
Malaysia's palm oil inventories reached a five-month high in July, driven by robust production exceeding exports, though rising stocks are expected to keep CPO prices firm through the second half of 2026. The Malaysian Palm Oil Board reported a 3.3% month-on-month increase in palm oil stocks to 2.63 million tonnes in July, marking the fourth consecutive rise.
Production surged 9.4% month-on-month to 1.79 million tonnes, while exports jumped 14.5% to 1.39 million tonnes; however, imports fell by 51.9% to 49,566 tonnes, and domestic consumption dropped by 10.8% to 365,872 tonnes. Major export destinations, including India, the European Union, India, and the Middle East, saw strong shipments, though China and the United States experienced declines.
Despite inventory increases, research firms anticipate continued support for CPO prices, attributing this to growing concerns over El Niño and limited global supply. CIMB Securities predicts CPO prices to range between RM4,400 and RM4,600 a tonne, citing geopolitical risks, El Niño, and higher biodiesel demand in Indonesia. Indonesia's B50 biodiesel mandate, along with reduced sunflower oil exports from Russia and Ukraine, may bolster palm oil's substitution demand ahead of India's September-November festive season.
RHB Research expects Malaysia's palm oil inventories to stay above two million tonnes throughout 2026, with export momentum continuing as importers stock up before the festive season. Stronger CPO prices and increased fresh fruit bunch (FFB) production are expected to enhance the plantation sector's earnings in the second quarter.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
