Crude palm oil (CPO) prices are expected to trade between MYR4,400-MYR4,650 (US$1,063-US$1,124)/tonne in July supported by the tightening supply outlook in Indonesia and increasing El Niño risk, according to latest Malaysian Palm Oil Council (MPOC) estimates.
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El Niño weather conditions could reduce rainfall and bring drier conditions across Southeast Asia, Australia and India, although palm oil yields and production would only be impacted after nine to 12 months, the MPOC said on 19 June.
According to Malaysia’s economic minister Akmal Nasir, El Niño could cause crop yields in Malaysia to fall by an average of 8-10% this year and rainfall to decrease by as much as 40-60% in some states, Reuters wrote on 11 June.
The MPOC said that price gains could be capped by elevated vegetable oil inventories in key importing markets, the association added.
Biodiesel economics had also become less supportive, as gas oil prices had fallen below palm oil prices in the futures market.
In May, Malaysian palm oil production declined by 6.9% month-on-month to 1.51M tonnes, partly due to oil palm trees temporarily entering a resting phase following higher than usual production between October 2025-March 2026.
In addition, two public holidays in May – compared to none in April – resulted in fewer harvesting days.
Meanwhile, a drop in exports in May was largely anticipated, as slower purchasing activity in March and April amid heightened price volatility was expected to lead to lower shipments in May and June.
Despite the monthly decline, total exports from January-May 2026 increased by 783,000 tonnes or 13.8%, with the largest increases recorded in shipments to India, Kenya and Vietnam, which collectively rose by 749,000 tonnes.
The Sub-Saharan Africa and ASEAN regions continued to emerge as important growth markets for Malaysian palm oil. In the first five months of 2026, the two regions accounted for 36% of Malaysia’s total palm oil exports, compared with 25% in 2022.
In the first half of 2026, US soyabean oil and rapeseed oil led the vegetable oil complex, rising by 59% and 16% year-to-date respectively.
The rally was driven by the US biofuel mandate and restrictions under the 45Z biofuel tax credits, which favoured North American feedstocks, MPOC said.
By comparison, prices of South American soyabean oil, sunflower oil and Malaysian palm oil rose modestly by 8%-10%.
The unusually high premium of US soyabean oil since March 2026 had sharply reduced its export competitiveness, MPOC said.
US soyabean oil exports fell to just 11,000 tonnes in May 2026, the lowest level in 19 months. Exports were expected to remain subdued if the premium persisted, leaving global importers increasingly dependent on South American supplies.
As of mid-June, US soyabean oil was trading at a premium of US$580/tonne over Argentine soyabean oil. At the same time, Indonesia’s exportable palm oil supply was expected to tighten from late third quarter into the fourth quarter, with its B50 policy taking effect in July 2026, alongside stagnant production and higher front-loaded demand.
According to Oil World projections, Indonesia’s palm oil production would remain broadly unchanged at 49.4M tonnes in 2026, while exports and domestic consumption in the first four months of 2026 were expected to increase by a combined 2.2M tonnes (+15%).
This could lead global importers to shift part of their sourcing towards Malaysia for greater supply stability, the MPOC said.
Higher fertiliser costs due to the US-Iran Iraq conflict could also discourage fertiliser application among smallholders in Malaysia and Indonesia, although the impact of lower fertiliser usage would only become evident after a time lag.
Vegetable oil stocks in major importing markets had risen sharply, driven by weaker near-term consumption amid inflationary pressures, the MPOC said.
In May, India’s vegetable oil stocks reached a 17-month high of 2.2M tonnes, while China’s vegetable oil stocks climbed to almost 2M tonnes, the highest level in 2026.
Higher stocks in Indian and Chinese markets could temporarily slow import demand in the near term, according to the MPOC.
