KUALA LUMPUR, May 12 — Investment Banks are expecting crude palm oil (CPO) prices to range between RM4,250 and RM4,350 in 2026, driven by rising biodiesel demand and growing risks of a severe El Nino.
In a research note, Kenanga Investment Bank Bhd (Kenanga IB) said planters are also expected to face higher fertiliser and energy costs from the second half of 2026 (2H2026) onwards.
However, the plantation sector is still likely to emerge as a net beneficiary of the West Asia conflict, supported by higher CPO prices, which surged from RM4,019 per tonne in January to RM4,568 per tonne in April, amid resilient demand growth of three to four per cent and rising demand for palm biodiesel.
Kenanga IB said the likelihood of CPO prices staying firm beyond 1H 2026 and into financial year 2027 (FY 2027) is increasing due to the rising possibility of a very strong El Nino taking shape.
“Historically, El Nino does not affect oil palm yields much, even ‘strong’ ones. However, a ‘very strong’ El Nino condition can disrupt flowering, and hence the following season’s fresh fruit bunch (FFB) yields.
“In the past, Indonesia was also less affected than Malaysia by a very strong category El Nino, due possibly to younger trees then and oil palm planting spread over a wider geography,” it said.
Kenanga IB said that, on the whole, a very strong El Nino condition tended to pull down the region’s output by two to nine per cent in the following year, hence potentially nudging CPO prices up by another five to 10 per cent.
The investment bank maintained its ‘overweight’ call on the sector, with a CPO price of RM4,250 per tonne in 2026 and RM4,200 in 2027.
Meanwhile, Hong Leong Bank Investment Bank Bhd maintained its 2026 CPO price assumption of RM4,350 per tonne, while the longer-term CPO price assumption is unchanged at RM4,200 per tonne from 2027.
“We maintain our ‘overweight’ stance on the sector, supported by near-term CPO price strength driven by elevated crude oil prices.
“However, we caution that the current upcycle is likely to be front-loaded, with medium-term risks arising from supply-side adjustments in competing vegetable oils,” it said.
