Palm oil futures are poised for a second consecutive weekly gain, lifted by steady Indian demand and a supportive biofuel policy backdrop. The market is consolidating near recent highs as traders weigh tighter supply signals against a mixed demand picture.
Demand Drivers: India and Biofuels
India remains a key pillar of demand, despite a sharp 30% drop in edible oil imports in June. The decline was largely seasonal, and the eight-month trend still shows a 7% rise in total imports, with palm oil’s share climbing to 48%. This suggests underlying consumption growth is intact, even if monthly flows have cooled.
A more structural demand boost is coming from Indonesia’s B50 biodiesel mandate, officially launched this month. The programme, which mandates a 50% palm oil blend in diesel, is expected to redirect significant volumes of crude palm oil toward domestic fuel production. Indonesia’s government has stated that current CPO supply can support B50 this year, though higher output will be needed beyond 2026. The mandate has already lifted sentiment across the vegetable oil complex.
Supply Dynamics and Price Outlook
Supply fundamentals are tightening. The Malaysian Palm Oil Council (MPOC) has guided for CPO prices in the range of MYR 4,400–4,650 per tonne in July, citing a tighter supply outlook. Thailand’s recent restrictions on palm oil exports are also reshaping regional trade flows, potentially diverting more demand toward Malaysia and Indonesia.
Meanwhile, global crude oil prices remain firm, providing a floor for palm oil as a biodiesel feedstock. The Middle East conflict has reinforced this link, with vegetable oil markets increasingly sensitive to crude movements. Stronger soybean oil prices have also lent support to the palm oil complex.
What to Watch
Traders should monitor Indonesia’s B50 implementation pace and any policy adjustments, as well as India’s import patterns ahead of the festive season. The interplay between crude oil volatility and palm oil’s biofuel premium will remain a key price driver in the weeks ahead.