BMI raises 2026 average CPO price forecast to RM4,453 on tight supply

KUALA LUMPUR: Fitch Solutions company BMI has raised its forecast for the average price of front-month crude palm oil (CPO) futures on Bursa Malaysia for 2026 to RM4,453 per tonne, a 4.1 per cent increase from the previous year's average of RM4,279 per tonne. The forecast now anticipates average prices of RM4,550 per tonne in Q3 and RM4,582 per tonne in Q4 of 2026.

Front-month palm oil settled at RM4,589 per tonne as of August 17, marking a year-to-date gain of 16.1 per cent and an average of RM4,380 per tonne. The revision is due to a tightening supply and reduced production surplus for 2026/2027. Global output remains flat, while consumption from Indonesia's expanding biodiesel program grew by 2.7 per cent, diverting palm oil from exports to domestic fuel.

BMI also lowered its Malaysian palm oil production forecast, predicting a 3.5 per cent year-on-year decline to 19.5 million tonnes in the 2026/2027 season. Elevated stockpiles, combined with robust first-half production, indicate a well-supplied domestic market, with January-June output at nine million tonnes, up 0.6 per cent year-over-year.

While production challenges in Malaysia could bolster global prices, the large stockpiles may mitigate the upside. Despite Malaysia's goal to raise the biodiesel blend rate to 15 per cent, the impact on domestic CPO demand is expected to be minimal, accounting for only a small fraction of the projected domestic consumption of 4.3 million tonnes for 2026/2027.