Palm oil extended its rally to about 4,965 ringgit per tonne, the highest level since December 2024, driven by stronger biofuel demand and mounting supply concerns. Indonesia has launched its ambitious B50 biodiesel programme, which is expected to channel more palm oil into domestic fuel production and curb export availability. In anticipation of the programme’s full rollout in October, buyers are already moving to secure supplies.
At the same time, unusually dry conditions have affected plantations in both Indonesia and Malaysia, heightening worries over potential yield losses. The developing El Niño weather pattern could intensify dryness across Southeast Asia, further constraining output in the world’s two largest palm oil-producing countries. Reflecting these trends, the USDA projects that global palm oil inventories will fall to a nine-year low in the 2026/27 season.
Additional support for palm oil prices is coming from disruptions to sunflower oil exports out of Russia and Ukraine, which are prompting buyers to shift toward alternative vegetable oils, including palm oil.
