Kuala lumpur: BMI, a Fitch Solutions unit, has maintained its view that the average annual price forecast for Bursa Malaysia-listed crude palm oil (CPO) futures contracts will trade at RM4,150 a tonne in 2025. In a note today, BMI detailed the current market trends influencing this decision and the projected price movements.
According to BERNAMA News Agency, as of the market’s closure on June 27, front-month CPO contracts settled at RM3,986 per tonne, bringing the year-to-date average to RM4,360 per tonne. BMI anticipates that palm oil prices will fluctuate between RM3,800 per tonne and RM4,000 per tonne for the rest of 2025.
BMI noted that palm oil prices faced significant pressure during the second quarter, declining by 17.7 percent due to factors such as weaker global crude prices, improved Malaysian output, and subdued demand. However, the market experienced a brief rally in June due to geopolitical and policy developments.
The report indicated that prices rose by approximately six percent from June 12 to June 16, initially influenced by a surge in global crude oil prices linked to the Israel-Iran conflict. This rally was further supported by the United States Environmental Protection Agency’s announcement of significantly higher proposed biofuel blending targets for 2026 and 2027, with the 2026 target reflecting a 67.5 percent year-on-year increase.
While these proposals predominantly boosted soya oil, the overall strength in the edible oils sector also positively impacted palm oil prices. Concurrently, BMI forecasts Malaysian palm oil output to reach 19.5 million tonnes in the 2025/2026 season, marking a year-on-year increase of 0.5 percent.
BMI’s first-quarter 2025 price forecast update highlighted ongoing production challenges in Malaysia that were supporting palm oil prices, with Malaysian Palm Oil Board data showing a 5.9 percent year-on-year reduction in crude palm oil output during the first quarter of 2025. Nonetheless, BMI anticipated a recovery in Malaysian crude palm oil production over the following months.
The latest available monthly data for April and May 2025 confirmed this recovery, with cumulative output totaling 3.5 million tonnes, a year-on-year increase of 7.8 percent. This resurgence has helped ease recent tightness in the global market and exert downward pressure on prices.