Palm Oil Prices to Surge Amidst Tightening Supplies

Palm oil prices are poised for a significant increase, potentially reaching 4,600-5,000 ringgit a tonne by the close of 2026. This projection is driven by tightening future supplies, even as Malaysian inventories remain high. The widening price gap between immediate and forward contracts indicates a bullish trend.

Several factors are contributing to this expected rise. Indonesia's B50 and Malaysia's B15 biofuel mandates will increase palm oil consumption for fuel, thereby reducing availability for other uses. The potential impact of El Nino, while likely to affect 2027 production more severely, also adds to market concerns.

India is anticipated to continue its strong demand for palm oil, especially leading up to its festival season. Monthly imports, which saw a rise to 700,000-750,000 tonnes in July, are expected to stabilize around 700,000-800,000 tonnes in the coming months. Disrupted sunflower oil supplies from the Black Sea region have also redirected some demand towards palm oil, with Indian buyers favoring immediate spot market purchases due to current price advantages.