Malaysia: Rising output, cheaper substitutes limit gains in palm oil’s already elevated prices — analysts

Rising output and cheaper substitute are keeping a lid on the already elevated prices of palm oil amid a swelling stockpile.

Inventory in Malaysia, the world’s top palm oil producer after Indonesia, is likely to continue expanding in the coming months as production enters high season and offset any restocking activities ahead of Diwali celebration in India, analysts said.

Crude palm oil prices will remain subdued in July-September and average RM4,200 per tonne for whole of 2025, Hong Leong Investment Bank said in a note.

Palm oil’s key futures slipped to RM4,403 on Bursa Malaysia Derivatives following the data release. Prices of the edible oil used in everything from chocolate to diesel have gained about 10% so far this year and average RM4,344 per tonne year to date.

Data from the Malaysian Palm Oil Board out on Wednesday showed inventory climbing to a 20-month high of 2.2 million tonnes by the end of August as production rose faster than exports. Shipments to India, the world’s biggest buyer of vegetable oils, slipped during the month.

Exports could decline further due to the palm oil price premium against other competing oils, CIMB Securities said, noting that for each metric ton, palm oil currently trades at a premium of US$72 (RM303.98) to soybean oil, US$92 to rapeseed oil, and US$40 to sunflower oil.

Early data from independent cargo surveyors have shown weak exports in the first 10 days of September and could end the month at just 1.2 million tonnes to 1.4 million tonnes, below the historical average of 1.5 million tonnes, said Maybank Investment Bank.