Elevated crude palm oil (CPO) prices will continue through the second half of 2026, supported by tightening supply conditions and resilient demand, according to a report by The Star quoting Hong Leong Investment Bank (HLIB) Research.
In a note to clients, the research house had raised its average CPO price assumptions by MYR100 (US$24.54)/tonne to MYR4,450 (US$1,092)/tonne for 2026 and MYR4,300 (US$1,055)/tonne for 2027, the 9 July report said.
The increase reflected the heightened possibility of the El Niño phenomenon and Indonesia’s introduction of its 50% palm-oil based biodiesel (B50) programme, The Star wrote.
“We will incorporate the higher CPO price assumptions into our earnings forecasts and target prices in the upcoming results season,” HLIB Research said.
“Based on our estimates, every MYR100/tonne increase in our average CPO price projection would lift earnings of plantation companies under our coverage by 3% to 8%.”
According to an analyst with a bank-backed brokerage, the supply side catalysts for CPO prices included the potential risk El Niño posed to palm oil output and the remaining disruption to shipping through the Strait of Hormuz, which could continue to affect fertiliser availability and freight costs.
While El Niño’s effect on palm oil production typically lagged – often emerging 12-24 months after the event as moisture stress affected fresh fruit bunch (FFB) yields – the impact on CPO prices was generally felt much earlier, The Star wrote.
On the demand side, the analyst expected Indonesia’s B50 biodiesel mandate to lift palm oil demand while a wide CPO price discount to soyabean oil could support palm oil prices.
At the time of the report, the CPO price was at a US$440/tonne discount to soyabean oil compared to historical three- and five-year averages of US$190/tonne and US$250/tonne.
“Such a wide discount should continue to encourage substitution towards palm oil among major vegetable oil importers, providing an important buffer despite elevated absolute CPO prices,” the analyst added.
