Palm oil
Palm oil
Price movements (monthly)
Palm oil crude BMD K' Lumpur MY
Quarterly Change
Year-on-year Change
- European Commission data showed 2025/26 palm imports into the EU fell to about 510,000 metric tons, the lowest since 2006/07. Market players said uncertainty over the European Deforestation Regulation (EUDR) persists, with a proposed delay of its implementation until the end of 2026 likely dampening import demand.
- A new proposal may require “very large operators” to meet the original EUDR deadline of December 31, 2025, adding confusion. Traders told Expana this uncertainty is paralyzing buying decisions, with many unsure whether to seek compliant or regular palm oil. Industry insiders expect a one-year delay, but EU buyers are likely to restrict purchases to essentials until clarity arrives, they said.
- Market players told Expana they are wary of Indonesia’s potential 2026 B50 palm-oil biofuel mandate, which could add about 3 million mt of domestic demand by cutting exports. Traders said this could tighten global supply and shift demand to Malaysia or other oils. However, many players told Expana they doubt near-term feasibility due to low crude prices and refinery bottlenecks, viewing B50 more as a policy risk than immediate supply shock.
- GAPKI projected Indonesia could produce 56 million mt of palm oil this marketing year, citing favorable weather and strong prices, though several forecasts are notably lower. If realized, such supply could weigh on prices globally and prompt Malaysian exporters to cut prices to compete, potentially triggering a downward price spiral, sources say. Market players said the gap between projections and other forecasts fuels uncertainty and may dampen near-term buying.
Palm oil
Supply
Malaysia
The USDA estimates Malaysian palm oil production in 2025/26 to reach 19.5 million mt, an increase of around 100,000 mt compared to the previous season. Market players commented that Malaysia production could suffer on the back aging trees and a ‘weak’ replacement program as small holders are reported to be having difficulty obtaining permission on account of deforestation regulations within the nation.
Indonesia
The US Department of Agriculture (USDA) expects Indonesian palm oil production to hit 47.5 million mt in the 2025/26 season, potentially marking the country’s largest harvest, surpassing the record in 2022/23.
Despite the USDA forecast, Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI), suggested Indonesia could produce 56 million mt of palm oil this marketing year, which it attributed to favorable weather and “strong prices.” Some market players expressed scepticism because that figure is nearly 10 million mt higher than several other forecasts. Sources commented that if Indonesia did manage to produce 56 million mt, it could add downward pressure to the palm market because considerable amounts of supply would flood the market. Players added that if Indonesian sellers priced supply lower to move it, it could trigger a chain reaction in Malaysia, forcing sellers there to cut prices to compete and potentially causing a downward price spiral.
Consumption
Market players told Expana they remain concerned about Indonesia’s intention to move to a B50, or 50%, palm-oil renewable fuel blend. With the B40 mandate already locking in substantial domestic volumes, attention is turning to a potential 2026 rollout of B50. Multiple sources estimate B50 could require roughly 3 million mt of additional palm oil annually, likely sourced by reducing exports and affecting food and industrial users abroad. Traders cautioned that such a shift in domestic demand could quickly tighten international availability and redirect incremental demand toward Malaysia or alternative vegetable oils.
Players noted that European consumption has been declining year on year, several EU nations including the Netherlands and Germany have excluded palm-based biodiesel blends from meeting renewable fuel quotas, effectively eliminating a significant and previously growing portion of palm’s demand in the EU market. Market sources observed that the EU appears to prioritize ‘European’ vegetable oils such as soy, rape, and sunflower, as evidenced by the EU’s Renewable Energy Directives (RED II and RED III), which promotes the use of these oils in biodiesel blends. This policy focus is expected to further marginalize palm oil in the coming years, according to market sources.
Palm oil
Price forecast
Current market positioning at around MYR 4,200/MT sits comfortably within the fair value range of MYR 4,119-4,884/MT. Several factors suggests upside potential heading into 2026, the shorter term is focusing on weakness into the end of the year.
The fundamental backdrop presents a mixed but predominantly bearish picture. The fair value range itself is trending downwards, which creates natural downward pressure on prices and limits how high any rally can extend. This declining fundamental baseline suggests deteriorating market conditions that should cap upside potential.
Profitability dynamics reinforce the bearish case. Estimated gross profit levels currently sit above the historical average range, indicating producers are enjoying unusually strong margins. These elevated profits create significant room for price reductions whilst maintaining acceptable profitability, encouraging competitive pricing strategies that should push prices lower over time.
However, several factors provide partial offsets to the bearish narrative. Global inventory levels, measured in weeks of consumption, are forecast to decline through September 2026 according to USDA figures. This inventory drawdown should place upward pressure on prices, though the effect is mitigated by inventories remaining at relatively elevated absolute levels, preventing panic buying. Seasonal patterns offer modest support, with prices typically rising from their September lows into year-end.
Technical analysis presents conflicting signals. The long-term trend remains decisively bearish, suggesting any price increases would prove temporary corrections rather than trend reversals. However, a bullish divergence has recently triggered in the medium-term analysis, which historically precedes further price appreciation.
Overall, prices remain in a short-term downtrend, and so for now, our focus remains on lower prices.
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