KUALA LUMPUR, June 12 (Xinhua) -- Malaysian crude palm oil (CPO) prices are expected to remain firm through the second half of 2026 and into 2027, supported by rising biodiesel demand, tightening global edible oil supplies and the growing risk of severe El Nino weather that could curb production, according to several research houses.
CGS International said in a note on Wednesday that it expects CPO prices to trend higher in the second half of the year, driven by a potential strong El Nino as well as elevated soybean oil and rapeseed oil prices amid increasing biofuel consumption.
The research house noted that historical data show Malaysia's fresh fruit bunch yields typically fall 13 percent to 16 percent year on year during a strong El Nino period, while CPO prices rise by 22 percent to 23 percent.
For June, CGS International expects Malaysia's palm oil inventory to ease slightly from the previous month as tighter export availability in Indonesia benefits Malaysian shipments. Higher domestic consumption under Malaysia's B12 biodiesel program is also expected to reduce stockpiles.
The Malaysian Palm Oil Board said in a recent report that palm oil inventories rose 5 percent month on month and 22 percent year on year to 2.43 million tonnes in May.
Separately, BIMB Securities Research said in a note on Thursday that it expects CPO prices to remain volatile but supported within a range of 4,000 ringgit (about 983 U.S. dollars) to 4,800 ringgit per tonne in 2026.
The research house cited stronger edible oil demand from higher biodiesel mandates in Indonesia and Malaysia, increased U.S. biofuel requirements, potential supply tightness, and El Nino risk in the second half, which could disrupt production should dry weather conditions intensify.
It forecasts average CPO prices of 4,500 ringgit per tonne in 2027, reflecting growing biodiesel demand and the lagged impact of El Nino on yields.
Kenanga Research also said the likelihood of CPO prices remaining firm beyond the first half of 2026 has increased due to the rising possibility of a severe El Nino developing later this year.
It is noted that CPO prices have surged from 4,019 ringgit in January to 4,499 ringgit per tonne in May due to higher biodiesel demand following the Middle East conflict.
"Although fertilizer and energy costs have risen, the plantation sector is still likely to net gain from the conflict," said the research house. ■