Malaysian crude palm oil futures settled at about $1,100/MT (RM 4,494) on Wednesday, down 1.0% from the prior session, as a sharp decline in crude oil prices and weakness in rival vegetable oils pulled the market lower. The global benchmark stood near $1,105/MT, while Indonesia’s reference price was set at about $1,030/MT.
Energy and biodiesel headwinds Brent crude fell to about $87/bbl, extending a weekly drop that sources put at 8.1%. The slide erodes the biodiesel blending economics that have supported palm oil demand, particularly under Indonesia’s recently launched B50 mandate. Market participants are watching whether weaker crude will curb discretionary biodiesel blending elsewhere in Asia, as flagged by several industry sources.
Supply-side picture The MPOB’s June data showed Malaysian CPO production rising 8.1% month-on-month to 1.64 million tonnes, while closing stocks climbed 3.7% to 1.33 million tonnes. Exports increased 6.2% to 1.20 million tonnes, but imports surged 135.3% to over 103,000 tonnes, suggesting tight domestic availability in certain grades. The fresh fruit bunch reference price eased 1.3% to RM 48.90.
Peak production season is under way, and the prevailing El Niño (ONI +1.0) continues to bring dry conditions to parts of Kalimantan, though its impact on current yields remains limited.
Demand drivers Despite the near-term price softness, demand-side factors are lending support. India’s edible oil imports are expected to surge from July through October as buyers stock up ahead of the festival season, following a 30% decline in June. The wide discount of palm oil to soybean oil continues to attract price-sensitive buyers. Pakistan’s record $3.8 billion palm oil bill in the fiscal year underscores robust South Asian appetite.
Our model outlook Our model outlook expects CPO to consolidate near $1,100/MT with a mild bearish bias over the next seven trading days. Crowded speculative longs in the vegetable oil complex add vulnerability, but the palm-soyoil spread and anticipated Indian buying should limit downside. A firming ringgit (USD/MYR at 4.08) and neutral technicals also cap further losses. The market is awaiting the next MPOB release in about 13 days.
What to watch Buyers should monitor crude oil’s trajectory and any shift in biodiesel mandate enforcement in Indonesia, as well as the pace of Indian pre-festival restocking. The ringgit’s direction and weekly export data from Malaysia will provide near-term cues on price direction.