Kuala lumpur: Crude palm oil (CPO) prices for 2026 are anticipated to increase to RM4,350 per tonne, marking a rise of RM150 per metric tonne, as a result of tighter supply conditions, stated Hong Leong Investment Bank Bhd (HLIB).
According to BERNAMA News Agency, HLIB indicated that CPO prices are projected to remain high at RM4,500-RM4,600 per tonne during the second quarter of 2026, before moderating from the third quarter onwards. The bank's longer-term CPO price assumption remains unchanged at RM4,200 per tonne from 2027 as supply conditions are expected to normalize.
HLIB elaborated that every RM100 per metric tonne increase in the average CPO price projection could enhance earnings forecasts for plantation companies under its coverage by three to eight percent. The ongoing West Asia conflict is causing a multi-channel shock, influencing CPO through energy-linked demand and immediate supply tightness. Additionally, spikes in fertilizer costs could lead to crop switching to soybeans, which may limit medium-term price increases, while logistics disruptions might add temporary premiums.
CPO acts as a proxy for crude oil, and elevated crude oil prices are likely to improve biodiesel economics, boosting demand for vegetable oils and reinforcing CPO's position as an energy market proxy. HLIB maintains an 'Overweight' stance on the sector, with a preference for upstream planters that have secured input costs and stronger margin visibility.
Meanwhile, RHB Investment Bank Bhd reported that CPO prices have rallied by 19 percent since the beginning of the West Asia conflict, achieving a year-to-date average of RM4,188 per tonne. This rally is driven by a 46 percent spike in crude oil prices since the conflict began and its broader impacts. A significant repercussion is the potential for higher biodiesel mandates in Indonesia and globally. In Malaysia, discussions are ongoing about reinstating a B20 biodiesel mandate, which some politicians argue would be 20 sen per litre cheaper than current market prices. The existing B10 mandate in Malaysia uses 1.3-1.4 million tonnes of CPO, while a B20 mandate would double this amount.