CPO Prices Hover Under Threat of El Niño in Malaysia
Crude palm oil prices corrected again at the end of the week, with the benchmark CPO contract closing at 4,475 Malaysian ringgit per tonne on Thursday (12/6/2026), down 1.67% from the previous day. On a weekly basis, CPO prices weakened 2.7% from the position of 4,601 Malaysian ringgit per tonne on 4 June. The correction occurred after the market faced pressure from weakening world crude oil prices and competing vegetable oils on the global market.
Brent crude oil prices this week fell to their lowest level in more than three months. That condition reduced the attractiveness of vegetable oils as a biodiesel feedstock. At the same time, soybean oil prices on the Chicago Board of Trade and palm oil prices in Dalian also moved weaker, limiting room for CPO gains.
From the demand side, Malaysian export shipment data was actually still quite good. A cargo survey estimated Malaysian palm oil exports during 1-10 June increased by about 3.5% to 4.9% compared to the same period the previous month. However, the market is paying more attention to future supply developments.
The attention of market participants is currently focused on weather risks in Southeast Asia. The Malaysian government has warned that the El Niño phenomenon beginning to develop this month has the potential to slash agricultural commodity yields by 8% to 10% this year. Rainfall in a number of regions is even expected to drop by 40% to 60%.
The warning has drawn large attention because Malaysia is the world’s second-largest palm oil producer after Indonesia. The experience of the 2015-2016 El Niño remains a market benchmark. At that time, temperatures exceeded 37 degrees Celsius and Malaysian palm oil production fell by up to 18%.
The Malaysian government has prepared mitigation measures through round-the-clock weather monitoring and cloud seeding operations. Nevertheless, commodity markets generally react faster than actual production on the ground. The risk of declining harvest yields is being factored in from now because the impact of dry weather typically only becomes visible several months after an El Niño event begins.
On the other hand, industry data showed Malaysian palm oil stockpiles rose for the second consecutive month in May. This condition explains why prices have yet to respond aggressively to the El Niño threat. Current supply is still relatively ample, so the market has yet to face short-term scarcity concerns.
For now, CPO prices are moving between two forces. Weakening energy prices and competing vegetable oils are exerting pressure from the demand side, while the threat of El Niño opens up the risk of declining production in one of the world’s largest supplier countries. Weather developments in the coming months will be the factor most watched by market participants.