Malaysian crude palm oil futures settled around $1,104 per metric ton (RM 4,515), down 0.3% from the previous session, as the market weighed peak production against supportive demand signals. The global benchmark hovered near $1,101/MT, while Indonesia's reference price stood at about $1,030/MT. Brent crude held at $82 per barrel, offering little direction to biodiesel-linked palm oil values.

Supply: Stocks Building, Output Rising

Malaysia's June MPOB data showed 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 climbed 5.7% to 1,198,567 tonnes, but imports surged 135.3% to 103,113 tonnes, reflecting arbitrage opportunities and regional logistics. The FFB reference price slipped 1.3% to RM 48.90.

Our model outlook suggests prices are likely to drift lower over the next seven trading days, pressured by the seasonal production peak, a soft energy complex, and positioning ahead of the MPOB July report, which is expected to show further inventory accumulation. However, the downside is cushioned by firm Indian demand and the wide BOPO spread, while El Niño concerns limit aggressive selling.

Weather: El Niño Tightens Supply Outlook

ENSO conditions are firmly in El Niño territory (ONI +1.4), with notably dry weather across Sabah, Sarawak, and Kalimantan. This raises the risk of an earlier-than-expected production downturn, which could flip the market narrative from surplus to scarcity. The upcoming MPOB release, due in about four days, is the key event risk—a larger-than-expected inventory build could trigger short-term selling, while any signs of production stress could spark a rebound.

Demand: India and Biodiesel Provide Support

India's July edible oil imports hit a 10-month peak on higher palm oil buying, reinforcing the demand-side strength. The country is also seeking sunflower oil alternatives amid Black Sea disruptions, which could further support palm oil uptake. Meanwhile, Indonesia, Malaysia, and Thailand have raised their biodiesel mandates for 2026, and Pertamina has launched nationwide B50 distribution in Indonesia. These policy moves underpin structural demand for palm oil as a fuel feedstock, even as they contribute to global edible oil price pressures flagged by the RBI.

Market Context

CPO futures have seen profit-taking and losses on weaker soybean and crude oil prices, but rising crude has limited the damage. The market is on track for a weekly gain, supported by a strong export outlook. The Malaysian Palm Oil Council sees CPO prices stuck in a RM 4,400–4,650 range for August, aligning with current levels. Global food prices edged up in July, with edible oils among the contributors, per the FAO.

Takeaway for Buyers

Watch the MPOB July report for inventory direction—a bigger build could pressure prices, but any El Niño-driven production slowdown could quickly reverse sentiment. Also monitor Indian import pace and biodiesel policy updates, as these are the key demand-side variables shaping the near-term balance.