Analysts raise CPO price target for the rest of 2026 on rising supply risks

KUALA LUMPUR (Aug 11): Crude palm oil (CPO) is expected to see a price hike for the second half of the (2H2026), as rising supply risks provide upside to plantation stocks, said analysts.

Rising geopolitical risks and a strengthening El Niño have left analysts expecting CPO prices to trade above RM4,000 per tonne for the remainder of 2026.

“We expect CPO prices to trade within RM4,400–RM4,600/tonne in the near term, supported by rising geopolitical risks, strengthening El Niño conditions, and higher biodiesel demand in Indonesia,” CIMB Securities said in a note on Tuesday.

CIMB reported that falling exports of sunflower oil due to Russia and Ukrainian cargo strikes could support substitution demand of palm oil, providing further upsides as India’s festival season, which heavily increases cooking oil consumption, draws near.

Conversely, the research house noted that stronger El Niño conditions beginning in October could further reduce oil palm yields and production in Southeast Asia, albeit posing greater downside risks to supply from 2027 onwards due to “time lags” in production impact.

“Given stronger El Niño conditions and geopolitical risks, we raise our 2026 and 2027 CPO price forecasts by RM50/tonne to RM4,450/tonne and RM4,550/tonne, respectively,” said CIMB.

On another note, Indonesia’s B50 biodiesel mandate is expected to support CPO demand globally, as the US Department of Agriculture cut Indonesian palm oil production forecasts for 2026-2027 to 47.2 million tonnes due to drought expectations from October onwards.

“Indonesian palm oil stocks are projected to shrink 28% year-on-year to 3.1 million tonnes,” said Public Investment Bank, which expects an average CPO price of RM4,400 per tonne for 2026-2027.

However, concerns over high inventory levels capping further price upsides have grown, according to TA Securities.

This comes as Malaysia’s CPO stockpiles beat market expectations with a high of 2.63 million tonnes in July.

“The inventory build was mainly due to higher production and lower domestic usage, which more than offset the improvement in exports,” said TA Securities, which maintained assumptions of RM4,300 per tonne for CPO in 2026.

“On a year over year basis, stockpiles were 24.3% higher, while exports grew 4.8%. Production, domestic usage and imports declined by 1.1%, 19.5% and 6.9%, respectively,” it added.

For strategy, IOI Corporation Bhd (KL:IOICORP), Kuala Lumpur Kepong Bhd (KL:KLK), Hap Seng Plantations Holdings Bhd (KL:HSPLANT) and SD Guthrie Bhd (KL:SDG) were selected as top picks by the analysts.

Source: The Edge Malaysia