PETALING JAYA: Crude palm oil (CPO) prices are expected to climb towards RM4,200 per tonne in December, even after easing in November due to a six-year high in local stockpiles.
Prices will likely firm up as production enters a seasonally weaker phase, upcoming festive demand and tightening global supply, driven by Indonesia’s planned B50 biodiesel mandate.
The benchmark CPO contract on Bursa Malaysia Derivatives had declined from a high of RM4,612 per tonne in October to hit a low of RM3,975 last month before resting at RM4,151 at market close yesterday.
CPO prices eased in November as Malaysia’s palm oil stocks rose to a six-year high, signalling a temporary easing in supply tightness, as exports dropped in November.
Bloomberg reported palm oil inventories have risen 10% month-on-month to 2.71 million tonnes, the median of 11 estimates in a poll of plantation executives, traders and analysts.
This marks the highest inventory level since April 2019 and is about 47% higher than a year ago.
Reserves have been building steadily since March, a trend that could weigh on palm oil prices.
Nevertheless, Datuk Nageeb Wahab, ex-deputy secretary-general of the Council of Palm Oil Producing Countries, said he remains “bullish” on the near-term outlook of CPO prices.
He said the recent dip in CPO prices is a temporary correction driven by high production coupled with slow demand.
“Currently, production is high while demand is a bit slow. Historically, demand is slow during this period.
“Hence, this creates a build-up of supply. However, this is a short-term situation,” he told StarBiz.
Nageeb added that the recent dip in CPO prices is “not really a dive” but is coming off from the earlier high level of RM4,500.
“CPO prices are expected to hold at the RM4,000 level in the near term, and will be even higher in 2026,” he said.
Nageeb said the optimism surrounding CPO prices is due to production tapering in December, a surge in buying ahead of festive seasons like Chinese New Year and Ramadan, and higher expected CPO consumption from Indonesia’s B50 biodiesel mandate next year.
“The biggest supporting factor for CPO prices is Indonesia’s biofuel mandate.
“Every 10% increase in its biofuel mandate will remove around four to five million tonnes of CPO from the market.
“This will create a big vacuum and a shortfall in supply.
“For this very reason, CPO prices are still holding up at around RM4,000 per tonne despite the current situation,” he said.
Indonesia currently implements a mandatory bio content of 40% and is working to increase the amount of palm oil in the blend in a bid to reduce its reliance on imported fossil fuels.
Indonesia has allocated 15.6 million kilolitres (kL) of palm oil fuel this year for the B40 programme, up from 13.2 million kL consumed a year earlier.
Biodiesel producers group Asosiasi Produsen Biofuel Indonesia or Aprobi previously estimated the B50 implementation may require up to 19 million kL of palm oil fuel a year.
In a recent report, Malaysian Palm Oil Council (MPOC) said exceptionally strong production between July and October 2025 suggests output may decline more sharply than usual in December and into the first quarter of financial year 2026, as oil palm trees enter their biological resting phase.
Not to mention the onset of the monsoon in mid-November is also expected to hinder harvesting activities.
To this end, Nageeb said: “Come January 2026, when CPO stocks and production start to ease and demand picks up, people will get nervous and start buying aggressively”.
He noted CPO production is “quite stagnant” now, with Malaysia unlikely to surpass 20 million tonnes with this year’s output expected to come in at around 19.5 to 19.8 million tonnes.
Indonesia, Nageeb noted, will also not exceed 50 million tonnes with the bulk of its production for domestic consumption.
“Hence, what is available in the open market for other countries, is currently not that much,” he said.
Heading into December, MPOC is of the view that CPO prices are expected to be influenced by key factors such as firm export and domestic demand, India’s rising reliance on palm oil, and policy uncertainty in Indonesia.
CIMB Investment Bank Bhd head of Malaysia research Ivy Ng Lee Fang said CPO prices in December are likely to range between RM3,900 and RM4,200 per tonne with an average price of RM4,200 for 2026.
“The supportive factors are weaker supply from December to February and potential rollout of Indonesia’s B50 biodiesel mandate in the second half of 2026,” she said.
Ng, who is also the regional head of agribusiness research at CIMB, said the main structural drivers in determining the direction of CPO price and production going into 2026, include Indonesia’s push towards B50 and a slower supply growth.
“The key risks to CPO prices are the possibility of Indonesia scaling back its biodiesel mandate due to a lack of funding or weaker crude oil prices, as well as increased competition from substitute oil,” she said.
Nageeb said the only downside risk for CPO prices is if prices remain too high for too long, as buyers may permanently switch to other edible oils.
“When CPO prices shot up to RM6,000 to RM8,000 per tonnes during the Covid-19 period, it was unhealthy for the industry as this prompted buyers to find cheaper substitutes,” he said.
“When they go for cheaper substitutes, they are unlikely to return to palm oil.”
The weather is also another factor, with La Niña expected to take place next year.
“The wetter conditions will have an effect on CPO production in Malaysia, Indonesia, and Papua New Guinea and may stagnate yields and production growth,” he said.
He also acknowledged that the current oversupply of soybean oil in China has contributed to softer demand for palm oil in the short-term, as China has been offloading excess soybean oil into markets such as India.
However, Nageeb stressed that this situation is temporary and not expected to have a lasting impact on palm oil fundamentals.
He added that despite the recent weakness, soybean oil continues to trade at a premium to palm oil, which he sees as a positive sign.
