Palm oil prices are being buoyed by El Niño risks and rising demand for biodiesel

Malaysia’s palm oil stocks rose for a fourth consecutive month in July, reaching a five-month high of 2.63 mln tons, up 3.3% from the previous month. According to MPOB, production increased by 9.4% to 1.79 mln tons, while exports rose by 14.5% to 1.39 mln tons.

Despite rising inventories, analysts expect palm oil prices to remain high in the second half of 2026. CIMB Securities forecasts prices at MYR 4,400–4,600/t in the near term. The market is being supported by growing El Niño risks, geopolitical uncertainty and strong demand from key importers.

India is stepping up purchases particularly actively ahead of its festival season from September to November. An additional bullish factor could be lower sunflower oil supplies from Ukraine and Russia due to disruptions at Black Sea ports, potentially encouraging buyers to substitute some volumes with palm oil.

At the same time, demand for palm oil from the biofuel sector is increasing. Indonesia’s implementation of the mandatory B50 biodiesel blend could significantly boost domestic feedstock consumption. Annual biodiesel demand is expected at around 16.7–18 mln kilolitres.

El Niño remains another risk to supply, with its impact on oil palm yields expected to become more pronounced in late 2026 and in 2027. USDA has already cut its forecast for Indonesia’s palm oil production in MY 2026/27 from 48 mln to 47.2 mln tons due to the risk of prolonged drought. Against this backdrop, CIMB Securities raised its average palm oil price forecast to MYR 4,450/t for 2026 and MYR 4,550/t for 2027.

Tags: prices, biodiesel, palm oil