Malaysian crude palm oil futures settled at about $1,101 per metric ton (RM 4,498) on August 2, down 0.3% from the previous session, as the market consolidated after a crude-led rebound earlier in the week. The global benchmark hovered near $1,105, while Indonesia's reference price stood at about $1,030, reflecting a slight discount for the world's largest producer.

Supply: Ample Stocks, Rising Output

The latest MPOB data for June 2026 showed Malaysian CPO production at 1,638,777 tonnes, up 8.1% month-on-month, while closing stocks rose 3.7% to 1,332,697 tonnes. Exports increased 5.7% to 1,198,567 tonnes, but imports surged 135.3% to 103,113 tonnes, suggesting some arbitrage flows into Malaysia. The FFB reference price slipped 1.3% to RM 48.90.

These figures point to a well-supplied market, with peak production season underway. Stocks are building, which caps upside potential for prices in the near term.

Demand: Indian Imports Soften, But Festive Season Looms

Indian edible oil imports fell 30% in June, with palm and soybean oil shipments dropping sharply, according to industry data. However, reports indicate that imports are expected to surge from July through October as supplies tighten before the festive season. India is also seeking sunflower oil alternatives amid Black Sea disruptions, which could support palm demand.

Meanwhile, Indonesia's B50 biodiesel programme, launched in July, continues to underpin structural demand for palm oil as a fuel feedstock. The RBI has flagged biofuel production as a key driver of edible oil prices, linking it to Indonesia's mandate. Brent crude held steady at about $90 per barrel, keeping biodiesel economics broadly supportive.

Weather and Currency: El Niño Lingers, Rupiah Weakens

ENSO conditions remain in El Niño territory, with an ONI of +1.0. Kalimantan is experiencing notably dry weather, which could threaten future production in Indonesia. However, current output remains robust, and the market is not yet pricing in supply stress.

The Indonesian rupiah slipped against the dollar, trading around 18,024 per dollar, pressured by weaker China manufacturing data. A softer rupiah can make Indonesian exports more competitive, but it also raises import costs for other buyers.

Market Outlook: Consolidation with Mild Upward Bias

Our model outlook suggests CPO is in a near-term consolidation phase with a mild upward bias from seasonal firming and Indian demand. However, peak production and ample stocks are likely to cap gains. The market remains sensitive to crude oil movements, as well as any shifts in Chinese demand or currency dynamics.

Key Watch Points for Buyers

Buyers should monitor the El Niño-driven dryness in Kalimantan, as any escalation could tighten supply expectations. Also watch Indian import pace ahead of festivals, and whether crude oil can sustain its rebound. Finally, keep an eye on the rupiah and ringgit exchange rates, which directly affect dollar-denominated prices.