Crude palm oil (CPO) prices are expected to stay firm above RM4,700 per tonne in October, according to the Malaysian Palm Oil Council (MPOC). This forecast is driven by weather-related supply concerns in Malaysia and Indonesia, alongside robust energy markets and favourable biofuel economics. However, potential stock accumulation poses a downside risk.
Malaysia’s palm oil production increased by 1.4% month-on-month to 1.81 million tonnes in August, buoyed by higher fresh fruit bunch collection and improved oil extraction rates. Despite this, production has been on a year-on-year decline for six consecutive months. Exports from January to August rose by 806,000 tonnes to 10.4 million tonnes, although August saw a 7.5% drop due to weaker shipments to South Asia and the Middle East.
The dry conditions linked to El Nino have intensified since early August, with rainfall in Indonesia and Malaysia significantly below average. This has raised concerns about palm oil production impacts in the coming months. Oil World forecasts a decline in Indonesia’s palm oil production by 1.9 million tonnes and Malaysia’s by 0.7 million tonnes in 2027.
Global vegetable oil markets showed mixed results in September, with Malaysian palm oil prices rising by 3.5%. Energy market disruptions, including the shutdown of Saudi Arabia’s East-West pipeline, have further bolstered biofuel blending margins. Gasoil prices surged by 147% year-to-date by mid-September, whilst crude oil prices increased by 73%.
Looking forward, CPO prices are anticipated to remain stable, supported by ongoing weather uncertainties and energy market dynamics. However, easing energy prices and further stock accumulation could impact this outlook.
