Kuala lumpur: Crude palm oil (CPO) prices are anticipated to remain high in the second half of 2026 and reach their peak in the first half of 2027 due to a strong El Nino forecasted to impact Southeast Asia later this year.

According to BERNAMA News Agency, Kenanga Investment Bank Bhd (Kenanga IB) highlighted in a research note that a very strong El Nino can potentially reduce global palm oil production by two to five percent year-on-year, while even a moderate El Nino can sustain higher CPO prices. On June 12, Kenanga IB adjusted its average CPO price expectations to RM4,400 per tonne for 2026 from RM4,250 previously, and to RM4,450 per tonne for 2027 from RM4,200.

Kenanga IB stated that instead of CPO prices moderating in the second half of 2026 after a strong second quarter, they now expect prices to remain elevated throughout the second half of 2026 and peak around the first half of 2027, driven by the anticipated strong El Nino. The bank has maintained its 'overweight' stance on the plantation sector, with sector picks including IOI Corporation Bhd, Kuala Lumpur Kepong Bhd, PPB Group Bhd, United Malacca Bhd, and TSH Resources Bhd.

Kenanga IB emphasized that the plantation sector's valuations remain attractive given the defensive demand for edible oil and the asset-rich companies' balance sheets, with palm oil prices expected to stay elevated.