Indonesia’s Policy Uncertainty Keeps Malaysian Palm Oil Prices Buoyant

Malaysia’s palm oil inventory is expected to fall sharply to 1.7 million metric tons by end-December from 2.2 million metric tons reported at the end of August, according to the Malaysian Palm Oil Board (MPOB). This decline follows slower output combined with steady export growth, while palm oil prices are forecast to remain firm amid supply concerns linked to Indonesia’s unsettled policy environment.

 

Key Market Insights

 

Malaysian palm oil stocks are projected to decrease significantly over the coming months due to reduced production rates and increasing shipments abroad.

 

MPOB data indicates August-end inventories stood at 2.2 million metric tons, with a forecasted drop to 1.7 million metric tons by December-end.

 

Export demand remains strong, especially from key markets like India, driven by upcoming festive season purchasing cycles.

 

Crude palm oil prices are expected to maintain strength supported by global supply uncertainties, particularly relating to Indonesia's biodiesel policies and export duties.

 

Supply And Demand Dynamics

Malaysia’s palm oil production has experienced a slowdown compared to earlier months in 2025, reflecting seasonal cycles and labor availability. Despite production moderation, exports have shown resilience, buoyed by competitive pricing and sustained demand growth. This dual trend is helping to rebalance inventories closer to more normalized levels.

 

Indonesia’s Role In Market Uncertainty

Indonesia, as the world’s largest palm oil producer, plays a decisive role in global supply. Its policy unpredictability—especially changes in export levies and mandatory biodiesel blending rules—has created apprehension in markets. These factors are supporting firm palm oil prices in Malaysia, with buyers factoring in potential supply disruptions.

 

Outlook And Market Sentiment

Analysts predict palm oil prices will remain well supported through the final quarter of 2025, bolstered by tightening global supplies and robust demand outlooks. The expected inventory drawdown in Malaysia signals healthier supply-demand balance, likely stabilizing markets ahead of the new production cycle.

 

Source: Malaysian Palm Oil Board, Reuters, Trading Economics, MPOB Reports