HLIB Raises 2026, 2027 Average CPO Price Forecast To RM4,450, RM4,300 Per Tonne
KUALA LUMPUR, July 8 (Bernama) -- Hong Leong Investment Bank Bhd (HLIB) has raised its 2026 and 2027 average crude palm oil (CPO) price assumptions by RM100 per tonne to RM4,450 per tonne and RM4,300 per tonne.
In a note, the investment bank said the price assumptions would reflect the heightened likelihood of an El Nino and the implementation of Indonesia’s B50 biodiesel mandate.
It said a potential El Nino poses a risk to palm oil output and lends support to prices.
While El Nino’s effect on palm oil production typically lags -- often emerging 12 months to 24 months after the event as moisture stress affects fresh fruit bunches (FFB) yields, CPO prices tend to respond much earlier, it said.
“This reflects the market’s forward-looking nature, particularly if the event evolves into a strong and prolonged event that results in material rainfall deficits across key production regions in Indonesia and Malaysia,” it said.
Furthermore, HLIB said Indonesia’s planned implementation of the B50 biodiesel mandate (from July 1, 2026) is expected to provide a meaningful incremental demand outlet for palm oil.
It said a higher biodiesel blend increases the volume of palm-based biodiesel required for domestic diesel consumption, thereby absorbing a large portion of Indonesia’s palm oil production.
“The impact could be meaningful given the size of Indonesia’s domestic diesel market. If implementation proceeds broadly as planned, B50 could reduce the volume of palm oil available for export and tighten the global supply-demand balance,” it stated.
Meanwhile, HLIB expects current CPO price levels to be sustained into the second half of 2026 (2H 2026), with scope for further upside, underpinned by a confluence of supply-and demand-side catalysts.
It said the global palm oil market could remain structurally undersupplied should weather risks, fertiliser disruptions and Indonesia’s biodiesel policy converge.
“This could come at a time when Indonesia’s higher biodiesel blending mandate is expected to absorb a larger share of palm oil supply,” it said, maintaining its “overweight” stance on the sector.
“We continue to favour planters (companies) with predominantly upstream operations and greater exposure to Malaysian operations, given their higher earnings leverage to CPO price strength and lower exposure to foreign regulatory and policy risks,” it added.
-- BERNAMA