Palm Oil To See Lower Inventory In 2Q, Driven By Stronger Exports - Analyst

KUALA LUMPUR, April 13 (Bernama) -- Crude palm oil inventory is expected to inch down in the second quarter (2Q) of the year, driven by stronger exports as buyers stock up amid uncertainty over the current ceasefire in West Asia.

Kenanga Investment Bank Bhd (Kenanga IB) said that March’s closing inventory remained above the historical average but was the lowest year-to-date.

It said that despite stronger month-on-month production, palm oil inventory closed 16 per cent lower in March, due to a surge in exports to a near 10-year high.

“We expect Malaysian inventory to approach the 10-year average in 2Q due to stronger exports as countries build up reserves in the event of supply or shipping disruptions,” it said.

Kenanga IB said the strong March exports of 1.55 million tonnes occurred alongside a firmer March CPO price of RM4,321 per tonne. This inelasticity in exports to higher prices suggests rising food security concerns arising from the Middle East conflict.

“As such, whether the current Middle East conflict sees a ceasefire or otherwise, supportive demand for edible oils, including palm oil, is expected as buyers stock up for another quarter or two,” it said. 

The investment bank said that with the spike in energy prices, demand for biodiesel has surged, along with demand for edible oils such as palm oil.

“Although planters face rising fertiliser and energy costs, the sector is expected to be a net gainer as edible oil prices have surged with CPO prices rising from RM4,019 per tonne in January to RM4,500-RM4,700 per tonne in April, and consumption is expected to be resilient and grow three per cent to four per cent year-on-year (y-o-y) or more depending on biodiesel demand. 

“In addition, Malaysia started 2026 with a high palm oil inventory thanks to a record harvest in 2025, and many planters have locked in fertiliser at lower prices up till mid-2026, with sustainable development goals even locking in its entire year’s requirement already,” it said. 

Kenanga Investment Bank maintained its 2026 forecast CPO price at RM4,250 per tonne and its 2027 forecast at RM4,200 per tonne.

“We maintained an ‘overweight’ call on the plantation sector, with planters offering value and growth being preferred, such as Kuala Lumpur Kepong Bhd with a target price (TP) of RM24.50 per share, PPB Group Bhd (TP: RM14.85 per share), and TSH Resources Bhd (TP: RM1.55 per share),” it said. 

Meanwhile, Public Investment Bank Bhd (PIBB) said Malaysia’s palm oil inventories recorded the sharpest decline since March 2023, as major consuming countries accelerated stockpiling amid heightened geopolitical tensions.

“Concurrently, CPO prices rallied in March, rising more than 19 per cent, supported by higher crude oil prices and rising freight costs following the escalation of Middle East conflicts.

“These developments enhanced the relative attractiveness of biodiesel as a secure alternative fuel, thereby lifting demand for palm-based biofuels,” it said. 

Looking ahead, the investment bank expects CPO prices to remain well supported by tightening regional export availability amid Thailand and Indonesia’s prioritisation of domestic biodiesel programmes, as well as weather risks associated with the developing El Niño phenomenon. 

“We also expect Malaysia’s palm oil inventories to inch towards the psychological level of two million tonnes in the next two months,” it added. 

PIBB maintained its ‘overweight’ call on the sector and reiterated a full-year CPO price forecast of RM4,400 per tonne.

-- BERNAMA