Palm Oil Prices Poised for Surge as Production Surplus Narrows
Global palm oil prices are expected to surge due to a narrowing production surplus and robust Indian restocking ahead of the festive season. The research agency BMI, a unit of Fitch Solutions, said that global output is broadly flat, held back by a 3.5% decline in Malaysian production. However, consumption growth of 2.7% driven by Indonesia's accelerating biodiesel programme will divert additional palm from the export market into the domestic fuel pool.
According to BMI, near-term supportive factors include robust Indian restocking and disruption of shipments mainly sunflower and soybean oils in the Black Sea. Intensifying El Nino weather conditions also introduce a risk to production, adding another layer of price support. The agency raised its 2026 average price forecast for front-month Bursa Malaysia-listed crude palm oil (CPO) futures to MYR4,453/tonne, up from the previous forecast of MYR4,300.
US-based Expert Market Research quoted industry analysts saying that palm oil prices are expected to remain firm and could top MYR6,000 a tonne. The agency also noted that Indonesia's planned mandatory B50 biodiesel blending from July 1 is expected to boost domestic consumption of palm oil feedstock and potentially reduce export availability from the world's largest producer.
Rabobank said global palm oil prices will remain elevated between 2026 and 2031, driven by rising food demand, expanding biodiesel use across South-East Asia, and limited replanting of oil palm in Indonesia and Malaysia. Although global palm oil production is expected to increase over this period, total output may still fall short of demand.
Expert Market Research identified the main upside risk as a combination of the B50 mandate reducing export availability and El Nino weather disruptions curbing production simultaneously, which could push prices towards or beyond MYR6,000. On the other hand, Rabobank noted that buyers may face ongoing sourcing challenges while producers are likely to benefit from sustained price strength.