CPO prices to stay elevated on firm demand and tight supply
10/11/2025 (New Straits Times), Kuala Lumpur - Crude palm oil (CPO) prices, which hit a record average of RM5,087 per tonne in 2022, have since eased but remain well above historical norms, according to analysts.
CIMB Securities expects prices to stay firm in the near term, averaging around RM4,330 per tonne in fiscal year 2025 (FY25). The brokerage attributed the resilience to sluggish supply growth amid replanting cycles, limited new investments, ongoing labour shortages, and adverse weather conditions. Demand is also being bolstered by Indonesia's biodiesel expansion, particularly with the rollout of its B40 mandate in fiscal year 2025 (FY25).
"We assume average Malaysian CPO prices of RM4,200–4,286/tonne for FY26–28F, underpinned by a tight global edible oil balance, slower new oil palm plantings, and continued structural demand from Indonesia's biodiesel programme. This is lower compared with the average CPO price of RM4,366/tonne achieved in FY25.
Palm kernel (PK) prices are expected to average RM2,940–RM3,000 per tonne for FY26–FY28, slightly lower than the FY25 average of RM3,050 per tonne, supported by steady lauric oil demand and improving oleochemical margins. The firm also maintained a RM500 per tonne discount for Indonesian CPO relative to Malaysian prices to account for export levies and taxes, translating into a blended average of RM3,982–RM4,069 per tonne for UMB over FY26–FY28.
Glenauk Economics similarly forecasts CPO prices to remain firm at RM4,300–RM4,600 per tonne in the first half of 2026, supported by a delayed peak production season, with yields expected to decline only by December 2025 and January 2026.
CIMB Securities, citing Glenauk's report, added that heavier rainfall across northern Peninsular Malaysia could further pressure fresh fruit bunch yields by restricting estate access and disrupting harvesting activities.
While Indonesia's biodiesel policy adjustments may cause short-term volatility, Glenauk said palm oil fundamentals remain strong. It expects 2026 output to rise by 3 per cent in Indonesia and 1 per cent in Malaysia, bringing Malaysia's production to between 19.6 and 19.8 million tonnes, slightly below market expectations of 20 million tonnes.
CIMB Securities projects CPO prices to stay elevated at around RM4,200 per tonne, supported by Indonesia's planned B45–B50 biodiesel blend rollout by mid-2026, slower output growth due to replanting and estate seizures, persistent labour shortages, and potential weather disruptions linked to a developing La Niña.
Despite early-year fluctuations, both firms agree that palm oil fundamentals remain robust, underpinned by steady demand from the biofuel and food sectors, restocking in emerging markets, and disciplined supply management across Malaysia and Indonesia.
Overall, the research house expects CPO to remain within the RM4,000–RM4,500 range into early 2026, driven by sustained biodiesel mandates, limited acreage expansion, and possible weather risks tied to lingering El Niño effects.
CPO Trades in Wide Range Amid Supply Shifts, Biodiesel Optimism
CPO prices moved within a broad range of RM3,880–RM4,760 per tonne in the first nine months of 2025, reflecting a year marked by supply swings, policy shifts, and strong biodiesel-linked demand optimism.
After a weak first half due to swelling stockpiles and trade tensions, prices regained momentum from midyear, supported by Indonesia's biodiesel expansion drive, firm restocking demand, and expectations of tighter seasonal output. Despite record-high inventories by September, market sentiment stayed resilient, with CPO prices holding above RM4,000 per tonne heading into the final quarter.
Weak Start: Weather and Trade Pressures Weigh the prices
CPO prices began 2025 on a softer note. In January, prices slipped 9 per cent month-on-month (MoM) to RM4,672.50 per tonne despite a 7.5 per cent MoM drop in Malaysia's palm oil inventories to a 20-month low of 1.58 million tonnes. Heavy rainfall in Pahang, Johor, Sabah, and Sarawak disrupted harvesting, curbing supply.
However, a wide price premium over soybean oil raised substitution concerns, while an elevated POGO (palm oil–gasoil) spread of about US$430 per tonne dampened biodiesel demand prospects.
In February, prices rebounded modestly by 1.8 per cent MoM to RM4,759 per tonne as inventories declined further to a 22-month low of 1.51 million tonnes. Output fell 4 per cent MoM on persistent rains in Sabah, while domestic consumption surged 12 per cent. Yet exports slipped 14 per cent MoM, weighed down by palm oil's sustained premium over competing oils.
March–April: Inventory Rebuild Sparks Correction
March marked the first inventory increase in six months, with stocks rising 3.5 per cent MoM to 1.56 million tonnes. Output rebounded 17 percent MoM amid improved weather, while domestic disappearance surged 37 percent MoM to 450,000 tonnes following the Malaysian Palm Oil Board's (MPOB) inclusion of oil extracted from empty fruit bunches (EFB) and steriliser condensate in its production data. Despite stronger output, prices eased slightly by 0.4 per cent MoM to RM4,740 per tonne, weighed down by higher imports.
The market turned sharply bearish in April as inventories jumped 19 per cent MoM to 1.87 million tonnes, driven by a 22 per cent surge in output to 1.69 million tonnes. CPO prices fell 8.9 per cent MoM to RM4,319.50 per tonne amid mounting stocks and renewed trade tensions following the US announcement of higher import tariffs on April 2 and escalating US-China frictions.
May–June: Prices Breach RM4,000, Then Stabilise on Policy Support
The downtrend extended into May, with CPO prices falling 10 per cent MoM to RM3,880 per tonne, below RM4,000 for the first time in 2025, as inventories climbed to an eight-month high of 1.99 million tonnes. The decline came despite positive policy developments: India halved import duties on palm oil (effective May 30), while Indonesia raised its export levy (effective May 17) to fund biodiesel subsidies and replanting. Rising stocks and tariff uncertainty, however, kept sentiment muted.
In June, inventories breached the 2-million-tonne level as exports declined 10.5 per cent MoM. Still, prices edged up 2.2 per cent MoM to RM3,969 per tonne, buoyed by optimism following the US extension of the 45Z Clean Fuel Production Credit, which bolstered the broader vegetable oils complex.
July–September: Biodiesel Momentum Drives Recovery
From July onwards, CPO prices climbed for four consecutive months, supported by biodiesel momentum and pre-tariff buying.
In July, prices rose 3.6 per cent MoM to RM4,112.50 per tonne, even as inventories reached 2.11 million tonnes. Market sentiment improved on Indonesia's plan to raise its biodiesel blend to 50 per cent (B50) by 2026 and ahead of the US "reciprocal tariffs" effective August 8.
The uptrend continued in August, with prices gaining 5.2 per cent MoM to RM4,329 per tonne despite inventories rising to a 20-month high of 2.20 million tonnes. Domestic disappearance surged to a record 491,000 tonnes (+97 per cent YoY), reflecting increased use of EFB-derived oil and steriliser condensate. Anticipation of seasonal production tightening added further support.
By September, Malaysia's palm oil inventories rose to 2.36 million tonnes as domestic disappearance normalised (-33 per cent MoM). Even so, prices advanced another 1 per cent MoM to RM4,371.50 per tonne - the fourth straight monthly gain - driven by firmer exports to India, the Middle East, and the US, alongside Indonesia's reaffirmation of its mid-2026 B50 biodiesel mandate.