Palm oil reaches three-month high on supply concerns

Malaysian palm oil futures climbed to their highest level in more than three months on July 23, supported by expectations of tighter supplies and stronger biodiesel demand. The benchmark October contract on the Bursa Malaysia Derivatives Exchange rose 1.88% to 4,709 ringgit (USD 1,152.2) per ton, after touching an intraday high of 4,721 ringgit, the strongest level since April 8.

The market was supported by concerns over the potential impact of El Niño on future production, expectations of lower palm oil output in the fourth quarter of 2026 and the first half of 2027, as well as stronger biodiesel demand prospects amid higher crude oil prices and escalating tensions in the Middle East.

Gains in competing vegetable oils also boosted sentiment. Dalian’s most-active soyoil futures increased 0.75%, while its palm oil contract advanced 2.85%. At the same time, CBOT soyoil futures rose 0.84%, providing additional support for palm oil, which competes with other edible oils in the global vegetable oils market.

Analysts also expect stronger demand from India, where edible oil imports are projected to increase between July and October as domestic supplies tighten ahead of the peak festive season. Higher crude oil prices are also making palm oil a more attractive feedstock for biodiesel production.

However, further price gains could be limited by crop outlooks. Rabobank expects Brazil’s 2026/27 soybean crop to decline by 2% to 178 mln tons, while the Malaysian Palm Oil Council forecasts crude palm oil prices to trade in the range of 4,400-4,650 ringgit per ton in August.

Tags: prices, palm oil