CPO price premium over rivals is turning Malaysian palm oil’s key buyers to competing oils — analysts

Crude palm oil’s (CPO) continued premium over rival oils, such as soybean, is turning away Malaysian palm oil’s key buyers — India, the European Union and China — according to Gleanuk Economics.

It said in a note on Tuesday, after palm oil stock data release, that exports were the lowest since February 2024, as elevated CPO prices, which averaged RM4,700 per metric ton (MT) year-to-date, led to sharply reduced demand from key buyers.

Gleanuk said palm oil stock levels of 1.51 million tonnes in February 2025 were the lowest since March 2022, due to weak output and higher domestic consumption.

It said this was widely expected, as palm oil mill effluent (POME) oil exports escalated in February, due to Indonesian’s export ban on “waste” oils.

TA Securities in a separate note concurred, adding that the usual restocking activity ahead of Ramadan had been slower than anticipated, suggesting that Indian buyers may be turning to more affordable alternative oils instead of palm oil.

It said the market would be monitoring negotiations between China and the US, as any potential disagreement could significantly impact the soybean market.

Meanwhile, Hong Leong Investment Bank (HLIB) said it expects CPO prices to decline from the second quarter of 2025, with sustained palm oil’s premium over other oils and an increase in edible oil production.

“The downtrend in palm oil stock levels will likely persist into March 2025, mainly on the back of less favourable weather condition (which will likely suppress palm production further). Demand rationing, arising from escalated palm product prices, on the other hand, will likely persist into March 2025, and this will cap restocking activities ahead of the Ramadan month,” HLIB said.

On the other hand, BIMB Securities anticipates that elevated CPO prices, ranging from RM4,500 to RM5,000 per MT, will persist through the first quarter of 2025.

Its cautious outlook prevails thereafter, with projections indicating a decline to a broader range of RM3,500 to RM4,500 per MT for the remainder of the year.

Analysts estimated for CPO prices to average between RM3,800 per MT and RM4,200 per MT in 2025.