KUALA LUMPUR: Malaysian palm oil prices are poised for near-term gains as geopolitical tensions in the Middle East continue to influence energy markets, analysts said.

Hong Leong Investment Bank (HLIB Research) highlighted that the ongoing Iran conflict has created a multi-channel shock for the plantation sector, affecting energy, fertiliser and logistics, which in turn supports crude palm oil (CPO) prices in the near term.

The firm raised its 2026 average CPO price forecast to RM4,350 per tonne, up RM150 from prior estimates, citing tighter supply conditions.

Prices are expected to peak at RM4,500–4,600 per tonne in the second quarter of 2026 before moderating later in the year.

“Elevated crude oil prices will strengthen biodiesel economics, lifting demand for vegetable oils and reinforcing CPO’s role as a proxy for energy markets,” it said in a note.

However, HLIB Research cautioned that medium-term supply-side adjustments in competing vegetable oils, particularly soybeans, may cap further price upside.

Rising fertiliser costs are also expected to trigger crop switching, limiting long-term gains.

Logistics disruptions caused by the conflict have added temporary premiums to CPO prices, although HLIB Research noted these are likely transitory unless trade routes face prolonged disruption.

Positive sector fundamentals remain intact, including the US Environmental Protection Agency’s finalisation of renewable fuel standards for 2026–2027, the potential for El Nino affecting palm yields, and Indonesia’s push to implement a B50 biodiesel mandate, which would increase annual CPO consumption by about three million tonnes.

HLIB Research maintained an “Overweight” stance on the plantation sector, favouring upstream planters with secured fertiliser costs and strong margin visibility, such as Johor Plantations Group Bhd (Buy; target price: RM1.98) and SD Guthrie Bhd (Buy; TP: RM7.25).

Meanwhile, RHB Research echoed the positive outlook, noting that most planters’ share prices still reflect CPO prices below RM4,400 per tonne, suggesting potential upside for investors.

The firm attributed recent CPO gains, a 19 per cent rally since the start of the US-Iran war, to surging crude oil prices and rising biodiesel mandates in Indonesia and globally.

It noted that besides domestic policy shifts, international developments are also boosting CPO demand.

RHB Research said the increases in biofuel blend mandates in countries such as Argentina, Thailand and the US, with the EPA raising renewable fuel requirements for 2026–2027, driving stronger demand for soybean oil and indirectly supporting palm oil.

“In Malaysia, there is also talk about implementing a B20 biodiesel mandate again, with some politicians saying that B20 would be cheaper than current market prices of diesel by 20 sen per litre.

The current B10 mandate in Malaysia uses 1.3-1.4 million tonnes of CPO, while a B20 mandate would utilise double that amount, which is 2.6-2.8 million tonnes,” it added.

RHB Research kept its “Neutral” view on the sector, highlighting top picks such as Johor Plantations Group (TP: RM1.90), Sarawak Oil Palms Bhd (TP: RM4.25), IOI Corp Bhd (TP: RM4.85) and SD Guthrie Bhd (TP: RM6.70).

The firm recommended a tactically positive trading stance, acknowledging both the upside from geopolitical tailwinds and the risks posed by extreme commodity price volatility.

Other catalysts to monitor include potential El Nino impacts and developments in China-US trade tariffs.

Source : NST