PETALING JAYA: Malaysia’s palm oil inventories are expected to stay elevated in the near term amid softer exports and seasonal production trends.
Hong Leong Investment Bank Research (HLIB Research) noted that palm oil stockpiles rose for a sixth straight month, increasing 13% month-on-month (m-o-m) to 2.84 million tonnes in November.
This came despite a 5.3% m-o-m drop in output to 1.94 million tonnes, as a steep decline in exports – down 28.1% m-o-m to 1.21 million tonnes – outweighed lower production and firmer domestic consumption.
HLIB Research added the export slump was mainly due to the absence of festive-driven restocking and seasonally weaker demand from buyers in colder regions.
Citing consultants Intertek Services, the research house added palm oil shipments to Africa, Europe and India were particularly soft, with consultants Amspec reporting a further 10.3% m-o-m decline in exports during the first 10 days of this month.
The research house said inventories may have peaked in November but warned that any drawdown will likely be gradual.
“The decline in stock levels will likely be gradual over the next few months, as demand for palm oil is typically weaker during the November to February period,” it noted.
HLIB Research said crude palm oil (CPO) prices have fallen roughly 10% since end-October, bringing the year-to-date average to RM4,318 per tonne.
It maintained its CPO price assumptions of RM4,300 and RM4,200 per tonne for this year and next yer, respectively, and kept its “overweight” call on the sector.
Its top picks are SD Guthrie Bhd
, which is supported by expansion into renewable energy and industrial property, an improving balance sheet and a 3% to 4% dividend yield; and Hap Seng Plantations Bhd due to its net-cash position and strong leverage on CPO prices.
TA Research, meanwhile, noted that while November palm oil output fell 5.3% m-o-m, production was still 19.4% higher year-on-year.
Year-to-date, CPO prices have declined 16.2% to around RM4,036 per tonne, weighed down by oversupply.
“Strong production in both Malaysia and Indonesia has pushed inventories higher, while global demand remains soft and export growth has slowed,” the research house said.
TA Research said broader sentiment around edible oils has also been dampened by a bearish outlook for soybeans.
“At the same time, prices of competing edible oils have been declining, and the weaker crude oil market has reduced palm oil’s appeal as a biofuel feedstock, further weighing on prices.”
It noted that soybean futures had slipped below US$11 per bushel, reaching about US$10.85, as “uncertainty over China’s demand continues to weigh on sentiment” despite resumed US-China agricultural purchases.
The research firm said actual Chinese buying – estimated at around three million tonnes – remains far below the 12 million tonnes anticipated by US officials.
“This slower-than-expected demand continues to undermine market sentiment,” it said.
TA Research however expects seasonal monsoon-related supply disruptions and firmer festive demand to offer some support for CPO prices in the first quarter of next year (1Q26).
It maintained its “neutral” rating on the sector, projecting average CPO prices of RM4,000 per tonne next year, citing rising global production, softer demand from China and India, and increased competition from recovering soybean, sunflower and rapeseed oil supplies.
It added that while yields should improve, softer prices may cap upstream margins.
CIMB Research, meanwhile, expects Malaysian palm oil stocks to rise 3% m-o-m to 2.93 million tonnes this month as a mild recovery in exports is unlikely to offset output.
It expects production to fall 11% m-o-m to 1.72 million tonnes this month.
It noted average CPO prices fell 7.3% m-o-m to RM4,089 per tonne in November, with recent weakness – including spot prices around RM4,029 – reflecting concerns over Indonesia’s biodiesel mandate, rising Malaysian stockpiles, uncertainty over US biofuel policy and buyers’ caution amid high inventories.
“We expect the higher-than-expected stockpile to keep a lid on CPO prices until either exports strengthen meaningfully or there is clearer policy progress on biodiesel usage in the United States and Indonesia,” it said.
CIMB Research said the recent price decline has pushed palm oil to a slight discount to substitutes such as soybean, rapeseed and sunflower oils, which may help support exports.
“Given our expectation of slowing output into 1Q26 due to seasonality, we believe prices will remain supported above RM4,000 per tonne. We maintain our average CPO price forecast of RM4,200 per tonne for next year,” it said, keeping its “overweight” call on the sector.
