Jakarta. Global crude palm oil (CPO) prices could surge to as high as $1,500 per metric ton in the second half of 2026, driven by elevated crude oil prices, Indonesia's planned rollout of B50 biodiesel, and the prospect of El Nino disrupting production in major producing countries, according to industry analysts.

The bullish outlook comes despite recent fluctuations in palm oil markets, with analysts expecting supply constraints and stronger biofuel demand to support prices through the end of the year.

Tungkot Sipayung, executive director of the Palm Oil Strategic Policy Institute (Paspi), said palm oil prices remain closely linked to developments in global energy markets, particularly crude oil, which has climbed amid geopolitical tensions in the Middle East.

"International CPO prices will depend on how long crude oil prices remain elevated," Tungkot said. "Even if the conflict ends, many oil facilities and wells have been damaged and will require time to repair before production can fully recover."

The World Bank projects Brent crude oil prices to average $86 per barrel this year, significantly higher than the estimated $69 per barrel average in 2025.

Indonesia's planned implementation of mandatory B50 biodiesel blending from July 1 is also expected to tighten global palm oil supplies. The policy will increase domestic consumption of palm oil feedstock, potentially reducing export availability from the world's largest producer.

At the same time, forecasts of El Nino conditions in the latter half of 2026 could weigh on production in key producing countries, further supporting prices.

"If El Nino materializes, supplies from producing countries usually decline," Tungkot said. "There may be periods when international CPO prices reach $1,500 per ton between June and the end of this year."

However, he cautioned that the current period of strong prices may not extend beyond 2026. As energy prices eventually normalize and buyers adjust to higher palm oil costs, demand could soften.

"Prices will gradually adjust as global oil prices decline," Tungkot said. "And because palm oil becomes expensive, consumers will eventually reduce purchases."

The World Bank forecasts average global CPO prices of $1,089 per ton in 2026, up from $1,007 per ton last year. Average prices stood at $1,051 per ton during the first quarter and rose to $1,148 per ton in April.

Data from the Indonesian Palm Oil Association (Gapki) showed average CIF Rotterdam prices reached $1,356 per ton in January-March 2026, compared with $1,230 per ton during the same period a year earlier.

Despite the bullish outlook, The Trade Ministry recently lowered the reference price used to calculate export duties and levies for June. The reference CPO price was set at $1,029.51 per ton, down 1.9 percent from May's level of $1,049.58 per ton.

Trade Ministry Director General for Foreign Trade Tommy Andana attributed the decline to weaker demand from major importing countries, particularly India.

Danantara Sumberdaya Indonesia
Meanwhile, the government is moving ahead with plans to centralize exports of strategic commodities under Danantara Sumberdaya Indonesia (DSI), which officially began operations on June 1. The company is expected to fully implement a single-gate export system for strategic natural resources, including palm oil, starting Jan. 1, 2027.

Suroto, chairman of the Strategic Socio-Economic Cadres Association (AKSES), said Indonesia could draw lessons from Malaysia's Federal Land Development Authority (FELDA), which evolved from a rural development agency into a major integrated agribusiness group.

According to Suroto, DSI's role could expand significantly if integrated with state-controlled plantation assets transferred through the government's Forest Area Enforcement Task Force. He suggested that state-owned plantation operator PT Agrinas Palma Nusantara should be linked with smallholder farmers under DSI's coordination.

"In the Indonesian context, Danantara can be likened to FELDA, while DSI could function similarly to FGV Holdings Berhad as the business entity managing operations within the holding structure," Suroto said.

Malaysia's FELDA oversees extensive plantation estates, palm oil processing facilities, logistics networks, international trading operations, and downstream industries, providing a model that Indonesia could seek to emulate as it restructures its commodity export sector.