BMI, a unit of Fitch Solutions, has raised its 2026 average crude palm oil (CPO) price forecast to RM4,453 per tonne, up from a prior estimate, on expectations of tighter global supply. The revision, reported today, marks a fresh analyst outlook that diverges from the more bullish near-term calls circulating in the market.
The new forecast sits below the current Malaysian benchmark, which closed around RM4,626 per tonne (about $1,144/MT), up 1.2% on the session. The gap between the analyst's full-year average and spot prices suggests BMI sees room for prices to moderate from current levels over the remainder of the year, even as supply concerns persist.
Supply tightness drives revision
BMI attributed the upgrade to tightening supply dynamics, a theme echoed across recent market commentary. Malaysia's July output data from MPOB showed production at 1.79 million tonnes, up 9.4% month-on-month, while closing stocks rose 7.2% to 1.43 million tonnes. Despite the monthly build, stocks remain below year-ago levels, and export demand has been robust, with July palm oil exports jumping 14.5% month-on-month to 1.39 million tonnes.
Weather remains a key risk factor. The current El Niño episode (ONI +1.4) has brought dry conditions to parts of Kalimantan, raising concerns about Indonesian production into 2027. BMI's revised forecast appears to factor in some of this weather-related supply risk, though the house view remains below the most bullish market projections.
Market context
Other forecasters have been more aggressive. The Malaysian Palm Oil Council (MPOC) has said prices should stay above RM4,600 in September on tightening supply and geopolitical disruptions. BMI's RM4,453 average implies a softer trajectory for the rest of 2026.
Global benchmarks tell a similar story of elevated prices. The World Bank's palm oil reference stands at about $1,101/MT, while Indonesia's Kemendag reference price is around $997/MT. The wide spread between Malaysian and Indonesian benchmarks reflects differing export tax regimes and supply conditions.
Technical signals
Our model outlook notes that CPO is near 20-month highs, with bullish momentum from recent headlines and strong biodiesel demand expectations. However, technical indicators are stretched: the RSI sits at 73, above the overbought threshold, and prices are trading above the upper Bollinger Band. This suggests a possible near-term pullback after the recent run.
MPOB's ample July stocks and historically soft September seasonality could weigh on prices in the coming weeks. Our base case sees modest upside with a likely 3-5 day technical correction, though missing Bursa quotes and a stale anchor widen the uncertainty around this path.
For buyers and traders, BMI's revision adds to a mixed picture: supply concerns support prices structurally, but technical overbought conditions and ample near-term stocks argue for caution in chasing the rally.