Palm oil prices seen capped by Malaysian stocks despite El Niño outlook, top analyst says

KUALA LUMPUR, 4 OCTOBER 2026 —

Malaysian palm oil prices are likely to remain capped between 4,500 and 5,000 ringgit a metric ton through December as rising domestic stockpiles offset the bullish influence of an anticipated El Niño weather pattern, Dorab Mistry, director of Godrej International, said on Thursday.

Mistry, whose supply and price projections regularly move trading desks across Asia, delivered the assessment in Mumbai as the benchmark contract on the Bursa Malaysia Derivatives Exchange retreated from a near two-year peak.

Malaysia's palm oil inventories are on track to exceed 3 million metric tons by the end of October, Mistry said, a level he identified as the primary weight on prices in the final quarter of the year. The benchmark November contract on the Bursa Malaysia Derivatives Exchange fell 1.58% to 4,537 ringgit ($1,110.92) at the midday break on Thursday, pulling back sharply from the 5,049 ringgit high touched in mid-September.

The decline reflects the market's immediate focus on the physical overhang rather than the longer-term production threat posed by El Niño, which typically brings drier conditions to the key growing regions of both Malaysia and Indonesia.

Mistry noted that the El Niño phenomenon could curb output in 2027, although he cautioned that newly adopted seed varieties are more resilient to dry weather than earlier generations, potentially blunting the climatic impact on yields. The timeline suggests the market has a window of several months before any weather-driven supply contraction materialises in exportable volumes, allowing the current stock build to exert its full downward pressure.

On the demand side, rising energy prices fuelled by geopolitical conflicts have strengthened the case for biodiesel blending, providing a floor for palm oil values even as stocks swell. Indonesia, the world's top producer, is implementing a new 50% biodiesel blending mandate — known as B50 — which Mistry said is expected to tighten palm oil supplies and support prices.

The policy, among the most aggressive biofuel mandates globally, diverts a significant share of Indonesian crude palm oil output into domestic fuel use, reducing the volume available for export and indirectly bolstering Malaysian prices.

The interplay between Malaysia's swelling reserves and Indonesia's tightening domestic consumption creates a divergent picture for the two neighbours that dominate global supply. While Malaysian stocks act as a near-term cap, the structural shift in Indonesian demand architecture limits the downside and sets the stage for a potential rally once the El Niño effect begins to filter through production data next year.

Mistry did not specify a precise date for when the B50 mandate takes full effect, but described it as a factor already influencing market sentiment.

Godrej International, the Indian consumer goods and trading house where Mistry serves as director, operates across the edible oil value chain from sourcing to distribution, giving its forecasts a practical grounding in physical trade flows.

Mistry's reputation for moving markets rests on a track record of accurately anticipating turning points in the palm oil cycle, particularly the interaction between Southeast Asian weather, Indonesian policy, and Indian buying patterns — India being the world's largest importer of vegetable oils.

The benchmark contract's retreat from the September high of 5,049 ringgit to the 4,537 ringgit level at Thursday's midday break illustrates the speed with which the market has repriced the inventory outlook.

Traders in Kuala Lumpur and Singapore said the 3 million-ton stock threshold cited by Mistry aligns with their own estimates for end-October, reinforcing the view that the 4,500-5,000 ringgit range will hold until either export demand accelerates or production data confirms the El Niño impact.