Palm oil prices rise to a 20-month high

Palm oil prices climbed to their highest level in about 20 months amid stronger biofuel demand and growing risks to production in Southeast Asia. On Thursday, Kuala Lumpur futures rose to 4,927 ringgit/t, the highest intraday level since December 2024.

One of the key factors supporting the market is Indonesia’s implementation of its B50 biodiesel mandate, which increases the share of palm oil used in biodiesel production. As Indonesia is the world’s largest palm oil producer, diverting more feedstock to domestic fuel production could reduce export availability on the global market.

At the same time, concerns are mounting over production in Indonesia and Malaysia due to dry weather and a strengthening El Niño. The weather pattern typically brings drier conditions to much of Southeast Asia and could negatively affect oil palm yields. USDA already forecasts global palm oil stocks in 2026/27 to fall to a nine-year low.

Palm oil is also receiving additional support from disruptions to sunflower oil supplies from the Black Sea region. Recent attacks and disruptions to export infrastructure in Ukraine and Russia have sharply slowed agricultural shipments. As both countries are major global sunflower oil suppliers, importers are increasingly turning to alternative vegetable oils, including palm oil.

The palm oil market is therefore receiving simultaneous support from biofuel demand, weather-related production risks and disruptions to Black Sea sunflower oil supplies. However, further price gains could be limited by a stronger Malaysian ringgit and competitive soybean oil prices.

Tags: futures, prices, Malaysia, palm oil