Kuala Lumpur, 24 April 2026 – Crude palm oil prices are holding firm above RM4,500 per tonne, supported by tightening supply, robust biodiesel demand and rising geopolitical risks, even as global economic headwinds begin to cap further upside.
Malaysia’s palm oil inventories declined sharply in March, falling 16.1% month-on-month to 2.26 million tonnes, as exports surged to 1.55 million tonnes, outpacing production of 1.37 million tonnes. The strong export performance was driven by front-loading activities ahead of higher shipping costs, alongside softer Indonesian exports following earlier shipments before levy increases took effect.
Export Surge Signals Strong Global Demand
Malaysia’s export performance in the first quarter of 2026 reflected broad-based demand recovery across key regions.
Total exports rose 29.1% year-on-year, equivalent to an increase of 927,000 tonnes, with growth recorded across most markets. North Africa led with a 94% surge, followed by South Asia at 74%, Other Europe and Central Asia at 47%, Asia Pacific at 24%, and Sub-Saharan Africa at 20%. Growth in the Middle East and the European Union remained more moderate, at 8% and 1% respectively, while the Americas recorded a decline.
Biodiesel Expansion Driving Structural Demand
Palm oil prices have been among the biggest beneficiaries of rising biodiesel demand, particularly amid elevated crude oil prices.
Since the escalation of the West Asia conflict in late February, palm oil and US soybean oil prices have climbed 15–16%, outperforming other vegetable oils such as sunflower and rapeseed, which saw gains of only 2–5%.
The biodiesel push is intensifying globally:
- The United States recorded a 15-month high in biodiesel production in March, with mandates set to reach record levels in 2026–2027
- Malaysia’s B15 programme is expected to require an additional 300,000 tonnes annually
- Indonesia’s ambitious B50 mandate could demand up to 3 million tonnes per year, though implementation may stabilise at B40 depending on readiness
- Thailand’s move from B5 to B7 blending will require an additional 350,000 tonnes annually
These policies are expected to absorb an estimated 1.0–1.5 million tonnes of palm oil in Southeast Asia in the second half of 2026, tightening exportable supply.
Supply Tightness and Logistics Support Prices
Supply constraints are being reinforced by regional developments.
Thailand has tightened export controls by requiring permits for each shipment, potentially limiting supply flows. In 2025, Thailand exported around 1.3 million tonnes of palm oil, with India accounting for the majority of shipments.
Meanwhile, logistics costs continue to favour palm oil over competing oils. Despite Argentine soybean oil trading near parity with palm olein, high freight costs to Asia have preserved palm oil’s price advantage. As of mid-April, palm oil in India remained approximately US$50 per tonne cheaper than soybean oil, sustaining demand in key importing markets.
Energy Prices and Geopolitics Add Upward Pressure
Energy market uncertainty remains a key driver of palm oil prices.
Damage to energy infrastructure in the Middle East is expected to take months to repair, keeping crude oil prices elevated and reinforcing biodiesel economics. This mirrors the Ukraine–Russia conflict in 2022, when oil prices stayed above US$90 per barrel for several months, supporting palm oil prices over a sustained period.
El Niño Risk Adds Another Layer of Support
Weather conditions are also emerging as a bullish factor.
Malaysia has experienced reduced rainfall since mid-March, and forecasts indicate these dry conditions may persist until June, raising the risk of an El Niño event. Such weather patterns typically constrain yields and could further tighten supply, providing additional support to prices.
Outlook: Supported but Upside Limited
Crude palm oil prices are expected to remain supported above RM4,500 per tonne in the near term, underpinned by strong biodiesel demand, elevated energy prices and potential weather disruptions.
However, further upside may be limited by:
- Softer export demand due to inflationary pressures
- Slower economic growth in key importing markets
- Seasonal increase in palm oil production as output peaks
The Ledger Asia Insights
The current CPO price dynamics highlight a market balancing strong structural demand against cyclical headwinds.
For Asian investors, three key implications emerge:
1. Biodiesel Policies Reshape Demand Fundamentals
Government mandates are becoming a major structural driver of palm oil consumption.
2. Energy Markets Directly Influence CPO Pricing
Sustained high oil prices strengthen biodiesel economics, supporting palm oil demand.
3. Weather and Supply Risks Remain Key Catalysts
El Niño and regional supply constraints could tighten markets further, but demand sensitivity may cap price spikes.
CPO’s resilience above RM4,500 reflects a structurally supported market, where energy, policy and climate factors are converging to shape price direction, even as macroeconomic conditions introduce limits to further gains.
