Malaysian CPO benchmark settled around $1,108 per tonne, gaining 0.7% from the previous session (RM4,532/MT at USD/MYR 4.09). Global palm oil traded near $1,101, while Indonesia’s reference price was $1,030. Brent crude slipped to $79/bbl, down 0.3% on the day but nursing a 13.8% plunge over the past week. The market is balancing robust demand signals against a heavy supply narrative, with cautious positioning ahead of July MPOB data due in about five days.

What is Pushing Prices UP

The most potent near-term driver is the wide BOPO spread. Soybean oil at $1,581/MT versus palm at $1,108 creates a discount of $473 per tonne, making palm oil exceptionally attractive for price‑sensitive buyers. Food manufacturers and biodiesel producers in importing nations prefer palm, directly supporting export volumes and keeping FOB bids firm.

India’s palm oil imports surged in July to a ten‑month high on heavy buying ahead of festivals. This immediate uptake pulls physical cargoes from the market, tightening spot availability in Malaysia and Indonesia, and signals resilient demand despite global macro uncertainty.

Weather disruptions are adding a supply squeeze. Peninsular Malaysia has received 375 mm of rain over the last 30 days, with another 34 mm forecast for the coming week. Saturated soils and field flooding can delay fresh fruit bunch harvesting and transport, temporarily reducing mill arrivals and CPO output. At the same time, El Niño conditions with an ONI of +1.4°C are strengthening the medium‑term bullish narrative. Historically, such El Niño strength reduces palm yields after a 6‑12 month lag, threatening late‑2026/early‑2027 production.

August seasonality provides a mild tailwind, with prices historically rising an average 0.7% month‑on‑month.

What is Pushing Prices DOWN

The collapse in Brent crude is the heaviest weight. A 13.8% drop to $79/bbl slashes the profitability of palm‑based biodiesel. When diesel prices fall, blending mandates become less economical unless subsidised, eroding a crucial demand pillar for palm oil. The weak crude also sours overall vegetable oil sentiment as it dims energy‑linked demand prospects.

Speculative positioning in related oilseeds has turned fragile. Managed‑money net longs in CBOT soybean oil remain at the 85th percentile but were cut by 15,493 contracts. Such crowded longs are vulnerable to liquidation if crude continues to fall or if soybean oil fundamentals weaken, and the resulting sell‑off often spills over into palm markets.

Indonesian exports are becoming more competitive as the rupiah weakens to USD/IDR 17,937. Cheaper Indonesian CPO undercuts Malaysian FOB prices, especially when global buyers are price‑sensitive. This intensifies the fight for market share at a time of peak seasonal production.

Technicals are signalling near‑term downward pressure. The price is near the upper Bollinger Band at $1,115, and the 5‑day SMA just crossed below the 20‑day SMA (a death cross), indicating a short‑term downtrend. The RSI at 52 is neutral, suggesting room for further decline.

Which Side Has the Upper Hand

With five bullish drivers against four bearish, the upside currently holds the advantage. The wide soy discount and strong Indian demand are providing concrete floor support, while weather‑related supply tightness in Malaysia adds immediate upside risk. The bearish arguments — chiefly the crude oil rout and technical weakness — are largely sentiment‑driven or anticipate future pressure rather than affecting physical flows today.

To flip the balance decisively bearish, one would need a combination of: (i) an unexpectedly large Malaysian stock build in the upcoming MPOB report, confirming that peak production is overwhelming exports; (ii) a further slide in Brent below $75/bbl, making biodiesel blends completely uneconomic and triggering fund liquidation in soyoil; (iii) a sharp reversal in Indian buying, perhaps on currency pressures; or (iv) a normalisation of weather in Peninsular Malaysia, relieving harvest constraints while Indonesian supply floods the market.

Our model outlook notes that while the immediate balance tilts bullish, the sharp Brent sell‑off and cautious market positioning ahead of the data release could still produce a slight net decline over seven days, with high volatility around the MPOB announcement.