PETALING JAYA: Analysts expect crude palm oil’s (CPO) supply and demand prospects to remain intact, supported by rising El Nino conditions, Indonesia’s B50 biodiesel mandate and CPO’s attractive price discount compared to soybean oil.

This was despite the Malaysian Palm Oil Board’s (MPOB) latest June release, which reported rising palm oil stocks to 2.45 million tonnes and the anticipation of continued higher cropping patterns that do not bode well for near-term CPO price movement.

Most research houses in their reports yesterday maintained an “overweight” stance on the plantation sector, with average CPO price assumptions ranging from RM4,300 to RM4,500 per tonne for 2026.

In a note to clients, RHB Research said higher output and imports – partially offset by stronger exports – lifted MPOB’s June 2026 inventory to 2.54 million tonnes, raising the annualised stock-to-usage ratio to 12.4%.

“Going forward, we expect stock levels to continue to rise as output is in peak season, albeit slightly offset by improving demand as restocking activities persist and Indonesia’s B50 mandate begins, both supporting export offtake,” the research house noted.

RHB Research’s top picks are Johor Plantations Group Bhd

, Sarawak Oil Palms Bhd

, IOI Corp Bhd

, Hap Seng Plantations Holdings Bhd

, Triputra Agro Persada, PP London Sumatra Indonesia, SD Guthrie Bhd

, and First Resources Ltd.

Meanwhile, Hong Leong Investment Bank (HLIB) Research expects the elevated CPO prices to be sustained through the second half of financial year 2026 (2H26), supported by tightening supply conditions and resilient demand.

It continues to favour planters 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.

HLIB Research’s top “buy” picks are SD Guthrie with a target price of RM7.05 and Hap Seng Plantations at RM2.89 per share.

In a report, TA Research expects CPO prices to remain range-bound in the near-term.

Seasonally high production and elevated Malaysian stockpiles are likely to cap upside in the third quarter of financial year 2026 (3Q26), while export demand will need to improve to absorb the additional supply.

El Nino conditions are strengthening, although the impact on palm oil production is likely to emerge with a lag. As such, the near-term effect may be more on market sentiment than physical supply.

That said, downside should be cushioned by Indonesia’s B50 biodiesel programme, tighter global vegetable oil inventories and a firmer soybean oil outlook in 2H26.

“Prices could strengthen towards 4Q26 as B50 implementation gains traction, production slows seasonally and year-end demand improves,” TA Research added.

The research house also has “buy” ratings on SD Guthrie at a target price of RM7.36, Kuala Lumpur Kepong Bhd

at RM24.64, IOI at RM4.98, United Malacca Bhd

at RM7.03 and Kim Loong Resources Bhd

at RM2.82.

Similarly, an analyst with a bank-backed research house maintained a “tactical” positive call on the sector.

While Brent crude had eased to US$76 per barrel from the highs of US$90 to US$100 per barrel, the renewed US-Iran tensions could yet push energy prices higher, improving biodiesel blending economics and enhancing the viability of Malaysia’s B15 and Indonesia’s B50 mandates.

This would support stronger domestic consumption and absorb excess palm oil supply.

Meanwhile, the cost pressures are likely to persist into 2H26 and 1H27, driven by elevated urea prices and diesel-linked logistics costs, while downstream players continue to face higher freight and insurance costs precipitated by intensified tensions in the Strait of Hormuz.