Kuala lumpur: Crude palm oil inventory is expected to inch down in the second quarter (2Q) of the year, driven by stronger exports as buyers stock up amid uncertainty over the current ceasefire in West Asia.
According to BERNAMA News Agency, Kenanga Investment Bank Bhd (Kenanga IB) noted that March's closing inventory remained above the historical average but was the lowest year-to-date.
Kenanga IB highlighted that despite stronger month-on-month production, palm oil inventory closed 16 percent lower in March due to a surge in exports to a near 10-year high. The bank expects Malaysian inventory to approach the 10-year average in 2Q as countries build up reserves in anticipation of potential supply or shipping disruptions.
The investment bank reported that strong March exports of 1.55 million tonnes occurred alongside a firmer March CPO price of RM4,321 per tonne. This inelasticity in exports to higher prices suggests rising food security concerns arising from the Middle East conflict. Whether the conflict sees a ceasefire or not, supportive demand for edible oils, including palm oil, is anticipated as buyers continue to stock up.
Kenanga IB also noted that with the spike in energy prices, demand for biodiesel and edible oils such as palm oil has surged. Although planters face rising fertilizer and energy costs, the sector is expected to be a net gainer, with edible oil prices surging as CPO prices increased from RM4,019 per tonne in January to RM4,500-RM4,700 per tonne in April. Consumption is projected to grow three to four percent year-on-year, depending on biodiesel demand.
Furthermore, Malaysia began 2026 with a high palm oil inventory due to a record harvest in 2025. Many planters have locked in fertilizer at lower prices up until mid-2026, with sustainable development goals even securing their entire year's requirement already. Kenanga IB maintained its 2026 forecast CPO price at RM4,250 per tonne and its 2027 forecast at RM4,200 per tonne.
The investment bank maintained an 'overweight' call on the plantation sector, with planters offering value and growth being preferred. Notable companies include Kuala Lumpur Kepong Bhd with a target price (TP) of RM24.50 per share, PPB Group Bhd (TP: RM14.85 per share), and TSH Resources Bhd (TP: RM1.55 per share).
Meanwhile, Public Investment Bank Bhd (PIBB) stated that Malaysia's palm oil inventories recorded the sharpest decline since March 2023 as major consuming countries accelerated stockpiling amid heightened geopolitical tensions. CPO prices rallied in March, rising more than 19 percent, supported by higher crude oil prices and rising freight costs following the escalation of Middle East conflicts.
PIBB expects CPO prices to remain well supported by tightening regional export availability amid Thailand and Indonesia's prioritization of domestic biodiesel programs, as well as weather risks associated with the developing El Ni±o phenomenon. The bank also anticipates Malaysia's palm oil inventories to inch towards the psychological level of two million tonnes in the next two months. PIBB maintained its 'overweight' call on the sector and reiterated a full-year CPO price forecast of RM4,400 per tonne.