Malaysian crude palm oil futures closed lower on Tuesday, with the benchmark contract slipping 1.6% to about $1108 per metric ton, as profit-taking after a recent rally and weaker rival oils weighed on sentiment. Brent crude fell 1.8% to $86 per barrel, dampening biodiesel blend economics and adding to bearish pressure.
Supply and Stocks
MPOB June data showed Malaysian CPO production rose 8.1% month-on-month to 1.64 million tons, while closing stocks increased 3.7% to 1.33 million tons. Exports grew 6.2% to 1.20 million tons, but imports surged 135.3% to 103,113 tons, reflecting active inter-market flows. The fresh fruit bunch reference price eased 1.3% to RM 48.90.
Demand Outlook
Despite the current weakness, demand prospects remain supportive. India's edible oil imports are expected to surge from July through October as buyers build stocks ahead of festivals, according to recent reports. The wide palm-soybean oil spread continues to make palm oil competitively priced in key markets. However, India's June imports fell 30% year-on-year, suggesting some near-term demand softness.
Biodiesel and Policy
Indonesia's rollout of the B50 biodiesel mandate, noted in recent headlines, is a structural demand booster for palm oil, though rising feedstock consumption has also been flagged by India's central bank as a factor behind elevated edible oil prices. The current El Niño (ONI +1.0) has not significantly disrupted rainfall across key growing regions, keeping production outlooks stable.
Price Drivers
Our model outlook points to modest downside in the coming week, with profit-taking and weaker crude oil likely to cap gains. However, the palm-soybean oil spread and anticipated Indian festival buying provide a floor. Mean-reverting dynamics prevail amid low volatility.
Takeaway for buyers: Watch for shifts in crude oil prices and Indian import pace; the current dip may offer near-term buying opportunities ahead of festival-driven demand recovery.