Kuala lumpur: Crude palm oil (CPO) prices are expected to remain firm above RM4,600 per tonne in September, supported by tightening supply fundamentals and continued geopolitical disruptions to global trade flows, said the Malaysian Palm Oil Council (MPOC). In a statement today, the council highlighted the ongoing challenges impacting CPO prices and the various factors contributing to these market dynamics.
According to BERNAMA News Agency, CPO futures (FCPO) forward contracts for 2027 traded on Bursa Malaysia Derivatives were also above RM5,000 per tonne as of mid-August, reflecting market concerns over the potential impact of El Nino. Indonesia's palm oil demand for B50 biodiesel blending is anticipated to strengthen further as the transition period to clear the remaining B40 biodiesel stocks ends in September.
However, downside risks remain. An easing of Black Sea logistical bottlenecks, the arrival of new-crop sunflower oil supplies in the export market, and lower energy prices as geopolitical tensions improve could lead to a correction in vegetable oil prices.
MPOC reported that Malaysia's palm oil production rose 9.4 percent month-on-month to 1.79 million tonnes in July 2026, an increase of 154,000 tonnes. Despite this, production remained below last year's level, marking the fifth consecutive month of year-on-year decline since March 2026.
Export performance strengthened further in July, with shipments rising 14.5 percent month-on-month to 1.39 million tonnes, mainly driven by stronger buying from India ahead of Diwali, as well as continued strong demand from the Sub-Saharan Africa region. Meanwhile, Malaysia's palm oil stocks continued to increase in July, reaching 2.62 million tonnes.
However, the stock build-up in Malaysia is not a major concern, as strong biodiesel demand and front-loading of exports in Indonesia have kept Indonesian palm oil stocks relatively low. The price rally following Malaysian Palm Oil Board's release of its supply and demand data on August 10 further reinforced the view that current palm oil stock levels are not excessive, although overall supply remains comfortable for the time being.
The global vegetable oil market continued to be supported by biofuel demand and geopolitical uncertainty in August, with Malaysian CPO prices leading gains at 3.9 percent, compared with increases of 2.7 percent for sunflower oil and 1.1 percent for soybean oil in Argentina. Meanwhile, rapeseed oil prices in Europe declined marginally by 0.8 percent.
MPOC noted that Malaysia's palm oil production typically peaks in September or October before declining in the fourth quarter. Production growth in the first seven months of 2026 was largely due to an improvement in the oil extraction rate (OER) of fresh fruit bunches. Malaysia's OER from January to May 2026 was significantly above the 10-year average, supported by favorable rainfall conditions six months earlier. However, OER fell below the average in June and July and is projected to remain below it for the rest of the year.