KUALA LUMPUR, 19 Aug 2026 — Malaysia’s palm oil production rose by 9.4% month-on-month to 1.79 million tonnes in July 2026, an increase of 154,000 tonnes. However, production in July 2026 remained below last year’s level, marking the fifth consecutive month of year-on-year decline since March 2026.
Export performance strengthened further in July, with shipments rising by 14.5% month-on-month to 1.39 million tonnes. The improvement was mainly driven by stronger buying from India ahead of Diwali, as well as continued strong demand from the Sub-Saharan Africa region.
Meanwhile, palm oil stocks continued to increase in July, reaching 2.62 million tonnes. However, the stock build-up in Malaysia is not a major concern, as strong biodiesel demand and front-loading of exports in Indonesia have kept Indonesian palm oil stocks relatively low.
The price rally following MPOB’s release of its supply and demand data on 10 August further reinforced the view that current palm oil stock levels are not excessive, although overall supply remains comfortable for the time being.
The global vegetable oil market continued to be supported by biofuel demand and geopolitical uncertainty in August, with palm oil leading the gains. Malaysian crude palm oil prices rose by 3.9% during the month, compared with increases of 2.7% for sunflower oil and 1.1% for soybean oil in Argentina. Meanwhile, rapeseed oil prices in Europe declined marginally by 0.8%.
Malaysia’s palm oil production typically peaks in September or October before declining in the fourth quarter. Production growth in the first seven months of 2026 was largely supported by an improvement in the oil extraction rate (OER) of fresh fruit bunches (FFB).
Malaysia’s OER from January to May 2026 was significantly above the 10-year average, supported by favourable rainfall conditions 6 months earlier. However, OER fell below the 10-year average in June and July 2026 and is projected to remain below the average for the rest of the year.
As production enters its seasonal downtrend in the fourth quarter and OER eases from the high levels recorded between January and May, palm oil production is expected to decline year-on-year in Q4 2026, tightening supply towards the end of the year.
At the same time, ongoing geopolitical disruptions are reshaping global vegetable oil trade flows. Shipping through the Bab al-Mandeb Strait and the Red Sea has been disrupted, while traffic through the Strait of Hormuz has declined following the expiry of the 60-day ceasefire between the US and Iran on 17 August.
Operations at several major ports and crushing plants in the Black Sea region have also been suspended following the renewed escalation of the Russia-Ukraine conflict, adding further uncertainty to sunflower oil export availability over the next 1-2 months.
These disruptions are shifting vegetable oil demand in major importing markets such as India towards palm oil, particularly ahead of the festive season. This trend was already evident in July, when India’s palm oil imports increased by 49.8% month-on-month and soybean oil imports rose 31.0%, while sunflower oil imports increased by only 3.6% amid tighter supply availability.
Biodiesel economics have also remained broadly supportive relative to vegetable oils since the start of the West Asia conflict in February, supporting biodiesel blending demand and margins. This is particularly the case in Indonesia, where domestic CPO prices are trading well below gasoil prices.
Looking ahead, crude palm oil prices are expected to remain firm above RM4,600 per tonne in September, supported by tightening supply fundamentals and continued geopolitical disruptions to global trade flows.
Crude palm oil futures (FCPO) forward contracts for 2027 traded on Bursa Malaysia Derivatives (BMD) were also above RM5,000 per tonne as of mid-August, reflecting market concerns over the potential impact of El Nino. Indonesia’s palm oil demand for B50 biodiesel blending could also strengthen further as the three-month transition period to clear the remaining B40 biodiesel stocks ends in September.
However, downside risks remain. An easing of Black Sea logistical bottlenecks, the arrival of new-crop sunflower oil supplies in the export market and lower energy prices as geopolitical tensions improve could lead to a correction in vegetable oil prices.
For all media enquiries, please contact:
Kartigha Ayamanny, Assistant Manager, Sustainability, Promotions and Communication
Email: kartigha@mpoc.org.my
The Malaysian Palm Oil Council (MPOC)
The Malaysian Palm Oil Council (MPOC) is dedicated to promoting the global market expansion of Malaysian palm oil and its derivatives by enhancing its image and acceptance through technological innovation, economic value, and environmental sustainability, with a vision to position Malaysia as the world leader in certified sustainable palm oil. Through a strategic network of international offices in key markets – including China, India, the Middle East, Africa, and ASEAN – MPOC actively engages stakeholders, opens new market opportunities, and strengthens the global presence of Malaysian palm oil. As a cornerstone of Malaysia’s economy, the palm oil industry contributed RM 112.5 billion in export earnings in 2025. MPOC remains committed to driving sustainable growth and global leadership in the palm oil sector.