We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry.
We focus on grains and food industry. current time
Palm Oil Gains Strength on Tighter Supplies and Rising Fuel Demand
Global palm oil prices are expected to remain firm through early 2027 as production growth struggles to keep pace with rising consumption. A combination of tighter supplies, stronger biodiesel demand in Southeast Asia, renewed Indian buying and weather risks linked to El Nino is creating a more supportive market environment.
Global production in the 2026-27 season is projected at around 81.4 million tonnes, broadly unchanged from the previous season. Malaysian output is expected to fall 3.5 per cent to 19.5 million tonnes, although higher Indonesian production should partly compensate for the decline. Indonesia’s output is forecast to rise 1.7 per cent to 47.5 million tonnes.
Against this limited supply growth, global consumption is expected to increase 2.7 per cent to 79.9 million tonnes. The resulting production surplus is likely to shrink from 3.6 million tonnes in 2025-26, reducing the buffer available to the international market.
Biodiesel remains one of the biggest drivers of the outlook. Indonesia has introduced a B50 programme, requiring a 50 per cent palm-oil blend in biodiesel. The policy is expected to absorb additional palm oil within the domestic fuel market, leaving less available for exports. Malaysia’s B15 programme and Thailand’s move towards B20 are also expected to increase regional consumption and further tighten export supplies.
India provides another source of support. Importers are expected to rebuild inventories ahead of the festive season, while disruptions to Black Sea shipments of competing sunflower and soybean oils could encourage greater demand for palm oil.
Weather is emerging as another uncertainty. Intensifying El Nino conditions could affect palm yields in major producing regions. A simultaneous production slowdown and stronger biodiesel consumption would create a particularly tight market and could push prices sharply higher.
The outlook has already prompted upward revisions to price expectations. The average 2026 forecast for front-month crude palm oil futures on Bursa Malaysia has been raised to MYR4,453 a tonne, compared with the earlier estimate of MYR4,300. Prices are expected to average MYR4,550 a tonne in the current quarter and MYR4,582 in the following quarter. Some market estimates see prices potentially moving beyond MYR6,000 a tonne if supply disruptions intensify.
However, the market still faces downside risks. A stronger-than-expected seasonal production peak in Indonesia and Malaysia, combined with competitive pricing from soybean and rapeseed oils, could limit gains.
Over the longer term, palm oil prices are expected to stay elevated as food consumption expands, biodiesel mandates spread and replanting remains limited in Indonesia and Malaysia. Buyers may therefore face tighter sourcing conditions and greater price volatility, while producers are positioned to benefit from stronger market conditions.
