BMI Raises 2026 Average CPO Price Forecast To RM4,453 On Tight Supply
KUALA LUMPUR, Aug 20 (Bernama) -- BMI, a Fitch Solutions company, has raised its 2026 average price forecast for front-month crude palm oil (CPO) futures listed on Bursa Malaysia to RM4,453 per tonne, up from RM4,300 per tonne forecast it had maintained since October 2025.
In its latest Palm Oil Price Forecast report, BMI said this represents a year-on-year (y-o-y) 4.1 per cent rise from the 2025 average of RM4,279 per tonne.
“On a quarterly basis, following averages of RM4,177 per tonne in the first quarter (1Q) and RM4,504 per tonne in 2Q, we expect prices to average RM4,550 per tonne in 3Q and RM4,582 per tonne in 4Q,” it said.
As of the Aug 17 market close, front-month Bursa Malaysia-listed palm oil settled at RM4,589 per tonne, a year-to-date gain of 16.1 per cent and a year-to-date average of RM4,380 per tonne, said BMI.
“The upward revision reflects a tightening near-term balance and a narrowing production surplus over 2026/2027.
“Broadly flat global output, held back by a 3.5 per cent decline in Malaysian production, is set against a consumption growth of 2.7 per cent, driven largely by Indonesia's accelerating biodiesel programme, which will divert additional palm from the export market into the domestic fuel pool,” it added.
BMI also said it has revised down Malaysia’s palm oil production forecast and expects output to ease 3.5 per cent y-o-y to 19.5 million tonnes in the 2026/2027 season.
Quoting Malaysian Palm Oil Board’s latest monthly data, BMI said domestic output reached 1.8 million tonnes in July 2026, up 9.4 per cent month-on-month in line with seasonal expectations, but was 1.1 per cent below July 2025 levels, which reinforces BMI’s recent downward revision.
Elevated stockpiles and strong first-half production support Malaysia's overall supply position, with January-June output at nine million tonnes, up 0.6 per cent y-o-y.
“Domestic stocks have drawn down over the course of the year. CPO closing stocks fell to 1.4 million tonnes in July from 1.7 million tonnes in January, driven by robust exports. CPO stocks still stand 40 per cent ahead of last year.
“Hence, although ongoing production challenges in Malaysia will lend support to global prices, the elevated stock position will temper the upside,” said BMI.
On Malaysia’s efforts to increase the national biodiesel blend rate up to 15 per cent, BMI said the impact on domestic CPO demand is expected to be relatively modest.
“We assume that a 12 per cent blend rate is the more realistic assumption for 2026, given that we are already halfway through the year with limited evidence of full implementation of the higher B15 mandate,” it said.
BMI estimated that moving from the current B10 level to a full B15 blend will lift biodiesel-related CPO demand by about 200,000 to 270,000 tonnes on an annualised basis, which is a fraction of the domestic consumption forecast of 4.3 million tonnes for 2026/2027.
It is unlikely to reach the full 15 per cent blend this year with half the year gone.
“We therefore view the biodiesel mandate as a modest, gradual tailwind for domestic consumption rather than a step-change that would meaningfully alter our price outlook,” it said.
-- BERNAMA