Kuala lumpur: Investment Banks are expecting crude palm oil (CPO) prices to range between RM4,250 and RM4,350 in 2026, driven by rising biodiesel demand and growing risks of a severe El Nino.
According to BERNAMA News Agency, Kenanga Investment Bank Bhd (Kenanga IB) stated that planters are anticipated to encounter higher fertiliser and energy costs from the second half of 2026 (2H2026) onwards. Despite these challenges, the plantation sector is likely to benefit from the West Asia conflict, with CPO prices rising from RM4,019 per tonne in January to RM4,568 per tonne in April, amid a steady demand growth of three to four per cent and increasing demand for palm biodiesel.
Kenanga IB highlighted the possibility of CPO prices remaining strong beyond the first half of 2026 and into the financial year 2027 (FY 2027), due to the increasing likelihood of a very strong El Nino event. Historically, while El Nino does not significantly impact oil palm yields, a 'very strong' El Nino condition can disrupt flowering, affecting the subsequent season's fresh fruit bunch (FFB) yields. The bank noted that in previous instances, Indonesia was less affected than Malaysia by a very strong El Nino, possibly due to younger trees and a broader geographical spread of oil palm plantations.
Kenanga IB indicated that a very strong El Nino could reduce the region's output by two to nine per cent in the following year, potentially pushing CPO prices up by another five to 10 per cent. The bank maintains its 'overweight' rating on the sector, projecting a CPO price of RM4,250 per tonne in 2026 and RM4,200 in 2027.
Furthermore, Hong Leong Bank Investment Bank Bhd maintains its 2026 CPO price forecast at RM4,350 per tonne, with the longer-term price assumption remaining at RM4,200 per tonne from 2027. The bank continues to hold an 'overweight' stance on the sector, underpinned by near-term CPO price strength driven by high crude oil prices. However, it cautions that the current upcycle may be front-loaded, with medium-term risks arising from supply-side adjustments in competing vegetable oils.