UALA LUMPUR (May 12): Palm oil prices may stay elevated amid concerns that supply may tighten in the coming months while demand remains robust, analysts said.

April’s rise in output appeared to be seasonal and there are still production risks from weather-related disruption, according to CGS International and CIMB Securities. The growing supply is also expected to be absorbed by biodiesel mandates in Indonesia and Malaysia, the research houses said.

Crude palm oil prices are expected to “remain higher for longer in 2026 as we see structural supply constraints and stronger biodiesel demand”, CGS International said.

The research house also flagged risks from the El Niño event — a weather condition that increases heat and reduces rainfall — that could tighten supply and keep prices averaging RM4,400 per tonne for 2026.

Palm oil futures slipped on Tuesday to RM4,476 on Bursa Malaysia Derivatives. Data out on Monday showed a faster-than-expected inventory build-up in April as output climbed while exports fell. Production typically begins picking up in March-April and peaks between October and November.

Prices of the edible oil used in everything from lipstick to biodiesel are off highs but are still up by 11% year-to-date as governments push for a higher blend of palm-based methyl ester in biodiesel to cushion a spike in petroleum prices from geopolitical conflict in the Middle East.

The implementation of such programmes in Indonesia and Malaysia, alongside higher US biofuel requirements, is expected to support demand for palm oil, said CIMB Securities.

Elevated crude oil prices will drive near-term palm oil’s near-term strength, Hong Leong Investment Bank said and maintained its ‘overweight’ call on the sector.

“However, we caution that the current upcycle is likely to be front-loaded, with medium-term risks arising from supply-side adjustments in competing vegetable oils,” the house added.

Source : The Edge Malaysia