BMI, a major research house, has raised its 2026 average crude palm oil (CPO) price forecast to RM4,453 per tonne, citing tight supply conditions. The revision, reported by multiple outlets, comes as the Malaysian benchmark hovers near RM4,596 per tonne, with the global benchmark at about $1,101 per tonne and Indonesia's reference price around $997 per tonne.
For traders and buyers, the move signals that supply constraints are expected to persist through the year, underpinning price levels well above earlier projections. BMI's forecast aligns with the current market tone, where CPO futures have recently touched multi-month highs.
Market backdrop
Malaysia's July data from the Malaysian Palm Oil Board showed production at 1,792,979 tonnes, up 9.4% month-on-month, while closing stocks rose 7.2% to 1,429,316 tonnes. Exports jumped 14.5% to 1,392,178 tonnes, a sign of robust demand despite ample supply. Imports fell sharply to 49,566 tonnes.
Meanwhile, the El Niño weather pattern (ONI +1.4) has brought dry conditions to parts of Kalimantan, raising concerns about future output in Indonesia, the world's top producer. Headlines about a potential "El Niño Godzilla" threatening Indonesian CPO production in 2027 have added to the bullish narrative.
Price drivers
- Biodiesel economics: Brent crude rose 2.2% to about $94 per barrel, improving the economics of palm-based biodiesel blends and supporting demand.
- Currency: The ringgit traded at 4.07 per dollar, while the rupiah was at 17,865, influencing export competitiveness.
- MPOC outlook: The Malaysian Palm Oil Council expects prices to stay above RM4,600 in September on tightening supply and geopolitical disruptions.
Our model outlook
Our model outlook sees CPO entering the next seven days in a short-term uptrend after breaking above the upper Bollinger Band. Bullish El Niño headlines and a wide BOPO spread are offsetting ample July stocks and peak production. The base case points to modest consolidation-to-firmer trade with daily moves around ±0.2%.
Key downside risk is profit-taking from crowded soyoil longs, while upside risk is a B50/El Niño-driven breakout. Missing cargo-surveyor export data widens uncertainty. Our published path is +0.1% over seven sessions.
BMI's revision adds to the growing consensus that supply tightness will keep prices elevated, even as production ramps up seasonally. Traders will watch upcoming export data and weather developments for further direction.