MPOC sees Malaysian palm oil above RM4,600 in September as supply risks grow

Price support despite higher Malaysian stocks

Malaysian crude palm oil prices are expected to remain above RM4,600 per tonne in September, supported by tightening supply fundamentals and continued disruption to global trade flows, according to the Malaysian Palm Oil Council. Utusan Malaysia rendered the forecast unit as RM4,600 per barrel, while Bernama reported it as RM4,600 per tonne.

Malaysia produced 1.79 million tonnes of palm oil in July 2026, an increase of 9.4% from June. However, the MPOC said output remained below its level a year earlier, marking the fifth consecutive month of year-on-year decline since March 2026. That contrast—a monthly recovery but persistent annual contraction—suggests that the recent increase has not removed concerns about the availability of Malaysian supply.

Exports also strengthened in July. Shipments rose 14.5% month on month to 1.39 million tonnes, driven mainly by stronger Indian purchases ahead of Diwali and sustained demand from Sub-Saharan Africa. The increase in exports exceeded the monthly growth rate in production, reinforcing competition for available volumes.

Stocks rise, but fourth-quarter output may weaken

Malaysian palm oil inventories increased to 2.62 million tonnes in July. The MPOC said this accumulation was not a major concern because strong biodiesel demand and early-season exports from Indonesia had kept stocks in the neighboring producer at low levels.

The council expects Malaysian production to decline during the fourth quarter of 2026 as the usual seasonal downturn develops. Oil extraction rates are also beginning to ease from the high levels recorded earlier in the year. Together, these factors could tighten physical supply toward year-end even after the July increase in inventories.

Indonesia represents another source of demand. The country’s palm oil use for its B50 biodiesel blend could strengthen after a three-month transition period for consuming remaining B40 biodiesel stocks ends in September. A rise in domestic Indonesian consumption would leave less palm oil available to the broader market if production and inventories do not increase sufficiently.

Geopolitical disruption reshapes vegetable-oil flows

Supply risks extend beyond palm oil. The MPOC cited disruption around the Bab al-Mandeb Strait, the Red Sea and the Strait of Hormuz after the United States-Iran ceasefire period ended on 17 August. These routes are important to global movements of refined oils, and continued disruption could raise logistical risk and redirect cargoes.

The Russia-Ukraine conflict has also led to suspended operations at several major ports and processing plants in the Black Sea region. According to the MPOC, this has increased uncertainty over export supplies of sunflower oil during the next one to two months. Reduced or delayed sunflower oil availability would strengthen demand for substitute vegetable oils, including palm oil.

The futures market is already reflecting some of these risks. Crude palm oil contracts for 2027 traded on Bursa Malaysia Derivatives rose above RM5,000 per tonne amid concern about the potential effects of El Niño.

Downside risks remain

The bullish outlook is not unconditional. The MPOC said prices could face downward pressure if Black Sea logistics recover and new sunflower oil supplies enter the market. Lower energy prices following an easing of geopolitical tensions would create an additional risk, particularly because energy values influence biodiesel economics and demand for vegetable-oil feedstocks.

For producers and traders, the balance therefore depends on whether seasonal palm oil constraints and Indonesian biodiesel use outweigh Malaysia’s higher stocks. Importers in India and Africa must also assess the risk that continued shipping disruption and restricted sunflower oil availability keep replacement costs elevated through the fourth quarter.