KUALA LUMPUR, Aug. 20 (Xinhua) -- Malaysia's crude palm oil (CPO) prices are expected to remain elevated through the rest of 2026 and into early 2027, as stronger biodiesel demand and the risk of an El Niño-driven supply disruption tighten the global vegetable oils market, research houses said.
BMI Country Risk and Industry Research has raised its 2026 average price forecast for front-month Bursa Malaysia-listed CPO futures to 4,453 ringgit (1,103 U.S. dollars) per ton, from 4,300 ringgit previously, citing a narrowing global production surplus as consumption growth outpaces supply.
"We expect global palm oil production to reach 81.4 million tons in the 2026/27 season, a marginal decline of just 20,000 tons from 2025/26," BMI said in a note on Wednesday.
Global consumption is forecast to rise 2.7 percent year on year to 79.9 million tons, reducing the production surplus from 3.6 million tons in 2025/26.
BMI expects prices to remain strong into the first quarter of 2027 before gradually easing as El Niño risks dissipate.
It forecasts CPO prices to average 4,543 ringgit per ton in 2027, slightly higher than its 2026 forecast, supported by the carry-over of strong prices in the second quarter and new structural demand from expanding biodiesel mandates.
The Malaysian Palm Oil Council (MPOC) also expects CPO prices to remain firm above 4,600 ringgit per ton in September, supported by tightening supply fundamentals and continued geopolitical disruptions to global trade flows.
MPOC said forward contracts for 2027 CPO futures on Bursa Malaysia Derivatives were trading above 5,000 ringgit per ton as of mid-August, reflecting market concerns over the potential impact of El Niño.
Indonesia's palm oil demand could also strengthen as the three-month transition period to clear remaining B40 biodiesel stocks ends in September, it said.
"However, downside risks remain," MPOC said, citing an easing of Black Sea logistical bottlenecks, the arrival of new-crop sunflower oil supplies in export markets, and lower energy prices if geopolitical tensions improve. These factors could trigger a correction in vegetable oil prices, it added.
Kenanga Research similarly expects edible oil prices, including palm oil, to remain elevated through the second half of 2026 and into 2027, supported by higher biodiesel demand and the risk of a severe El Niño.
The research house maintained its 2026 CPO price forecast at 4,400 ringgit per ton and its 2027 forecast at 4,450 ringgit per ton. ■