Malaysian palm oil rises to two-week high on El Niño supply risks

Malaysian palm oil futures rose on October 13 to their highest level in more than two weeks, as concerns over tighter supply in 2027 outweighed pressure from record inventories. The December contract on Bursa Malaysia gained 0.97% to 4,682 ringgit/t ($1,146.43/t), the highest closing level since September 24.

Malaysia’s palm oil inventories reached a record 3.51 mln tons in September amid historically high production. However, market participants believe the bearish impact of these figures has already been largely priced in, while the pace of stock accumulation may begin to slow.

According to StoneX, inventory growth could moderate noticeably as early as November if exports remain above 1.5 mln tons and production stabilizes around 2 mln tons. At the same time, weaker demand combined with production near record levels could keep stocks above 3.5 mln tons for longer and continue to weigh on prices.

The market is increasingly focused on supply risks for 2027. Key factors include the lagged impact of El Niño on yields and stronger domestic demand in Indonesia under the B50 program. Active exports are also providing support: Malaysian palm oil shipments in October 1–10 increased by 33.5–37.7% from the previous month.

At the same time, the external market backdrop remains mixed. Lower crude oil prices make palm oil less attractive as a biodiesel feedstock, while Dalian soyoil futures fell 0.65%. Despite this, concerns over future supply are currently providing stronger support than pressure from high inventories.

Tags: prices, Malaysia, palm oil