Kuala lumpur: Crude palm oil (CPO) prices are projected to trade higher in the second half of 2026, driven by the potential occurrence of a strong El Ni±o and increased biofuel demand, as reported by CGS International Securities Malaysia Sdn Bhd.
According to BERNAMA News Agency, CGS International Securities Malaysia Sdn Bhd highlighted data from the United States' National Oceanic and Atmospheric Administration (NOAA), which indicates an 80 to 90 percent probability of an El Ni±o event between June 2026 and February 2027. This development is expected to support CPO prices, as historical data suggests that Malaysia's fresh fruit bunch (FFB) yield typically declines by 13 to 16 percent year on year during a strong El Ni±o, while CPO prices increase by 22 to 23 percent year on year.
The stockbroking firm anticipates a decline in Malaysia's palm oil inventories month on month in June 2026, as reduced export availability from Indonesia is likely to benefit Malaysian exports. Additionally, higher domestic consumption under the B12 biodiesel program is expected to further reduce inventories. CGS International maintains an 'overweight' call on the sector, predicting that Malaysian producers will benefit more than their Indonesian counterparts from higher CPO prices, supported by stronger exports amid policy uncertainty in Indonesia.
Meanwhile, Hong Leong Investment Bank Bhd has maintained its 2026 CPO price assumption at RM4,350 per metric tonne (mt). The bank expects prices to remain elevated at RM4,500 to RM4,600 per mt in the second quarter of 2026 before moderating from the third quarter onwards. Its longer-term CPO price assumption remains unchanged at RM4,200 per mt from 2027. The investment bank also maintains its 'overweight' stance on the sector, pending a reassessment in its forthcoming 2H 2026 outlook. The bank notes that while elevated crude oil prices should continue to support near-term CPO prices, the current upcycle may be front-loaded, with medium-term risks from supply-side adjustments in competing vegetable oils.