Malaysian crude palm oil futures closed little changed around $1,104 per tonne today, as conflicting signals keep the market in a tight range. The flat session comes despite a 9.8% surge in Brent crude oil to $82/bbl, which bolsters biodiesel blending economics and strengthens the demand outlook for palm-based fuels.
Supply and Stocks Build
The latest MPOB data for June 2026 shows Malaysian CPO production rose 8.1% month-on-month to 1.638 million tonnes, while closing stocks increased 3.7% to 1.332 million tonnes. The stock build is in line with seasonal patterns and contributed to the market's capped upside. Exports managed a 6.2% monthly gain to 1.204 million tonnes, but that was overshadowed by a sharp 135% surge in imports—a sign of inter-market arbitrage flows. The FFB reference price eased 1.3% to RM 48.90.
Demand Headwinds from India
India's June vegetable oil imports plunged 29% year-on-year as the once-generous palm oil discount over soft oils has narrowed sharply. This is a major bearish factor for palm oil exports, as India remains the world's top buyer. Buyers should note that any further erosion in palm's price advantage will keep Indian demand subdued.
Biofuels and Policy Support
On the policy front, Indonesia's launch of the B50 biodiesel programme—requiring 23.3 million tonnes of CPO annually—provides a solid medium-term demand floor. This was reinforced by Jakarta Globe's report highlighting the massive feedstock needs. Combined with the spike in crude oil, biodiesel blending margins improve, making the mandate more attractive for obligated parties.
Malaysia's decision to keep the August CPO reference price elevated while maintaining the 10% export duty offers no immediate relief for buyers seeking lower-priced supply.
Weather and El Niño
The ongoing El Niño (ONI +1.0) is bringing dry conditions to Kalimantan, a key production region in Indonesia. Dry weather could curb yields in the coming months, adding a supply risk premium that may support prices into the second half of the year. However, our model outlook also flags seasonal July weakness, which typically sees lower demand as buyers wait for new-crop arrivals.
EU Deforestation Regulation and Market Access
The European Commission has finalised the product scope for the EU Deforestation Regulation, excluding leather but retaining palm oil. This removes some uncertainty for exporters, but compliance costs remain a factor.