The Edge Markets (12/08/2025) - KUALA LUMPUR (Aug 12): Rising supply in coming months will likely keep a lid on prices of palm oil already under pressure as inventory swelled to a 19-month high, analysts said.

Production in Malaysia, the world’s largest palm oil producer after Indonesia, is expected to pick up seasonally before peaking in September-October and keep stockpiles elevated, according to BIMB Securities and Apex Securities. Both kept their sector rating on ‘neutral’ in line with the consensus.

“Stocks should begin to ease from October onwards as India steps up restocking ahead of the Deepavali festive season and production slows with the onset of the Northeast monsoon” by year end, said BIMB Securities.

Data from Malaysia out on Monday showed that inventory expanded for the fifth consecutive month, hitting 2.11 million tonnes in July on the back of steady gains in production that offset the rise in exports.

Prices of the edible oil used in everything from ice cream to shampoo have remained above RM4,000 per tonne since the start of July. The benchmark three-month contract was last traded at RM4,372 on Bursa Malaysia Derivatives.

Palm oil prices are expected to hover around RM4,000 per tonne, underpinned by stronger US biodiesel demand and sustained competitiveness against other vegetable oils, which should attract price-sensitive buyers, said Apex Securities.

The main substitute soybean oil will likely stay high on a strong US biofuel demand outlook and production concerns, making palm oil even cheaper, the house noted. While the discount to soybean oil has widened, the upside for palm oil remains limited due to the burgeoning stockpile, it added.

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