Malaysian crude palm oil futures were little changed, with the benchmark hovering near $1,102 per metric ton, down 0.2% from the prior session. The ringgit traded at 4.09 per dollar, while the Indonesian reference price for August was set at $996.52 per ton, below the previous month's level. Global benchmarks, as tracked by the World Bank, were near $1,101/MT, keeping the market tightly ranged.

Supply: Stocks Build, But El Niño Risk Intensifies

The latest MPOB data for July showed Malaysian CPO production at 1,792,979 tons, up 9.4% month-on-month, while closing stocks rose 7.2% to 1,429,316 tons. Exports climbed 14.5% to 1,392,178 tons, and imports fell sharply by 51.9% to 49,566 tons. The FFB reference price edged up 1.2% to RM 49.50.

Despite the near-term stock build, the market is increasingly focused on the strengthening El Niño, with the ONI index at +1.4. Dry conditions in Sarawak and Kalimantan are raising concerns about future yields. Market previews of the upcoming MPOB report highlight a rising probability of a strong El Niño, and traders are watching for a potential 'inventory inflection point' that could shift the balance from surplus to deficit. Our model outlook suggests that while the anchor price of $1,102/MT is already three days stale, the anticipation of such an inflection may lend some support.

Demand: India Imports Surge, Biodiesel Mandates Hold

Demand-side news remains supportive. India's July edible oil imports hit a 10-month peak, driven by higher palm oil buying, as the world's largest vegetable oil importer accelerates purchases ahead of festivals. This bolsters the demand picture even as global food prices have risen to their highest level since 2023, with edible oils a notable contributor.

Indonesia, Malaysia, and Thailand have all raised their biodiesel mandates for 2026, with Indonesia's B50 rollout now nationwide via Pertamina. This policy-driven demand is a key pillar under prices, even as Brent crude held at $85 per barrel, up 0.7%, which limits the fuel-blending incentive. The wide BOPO spread remains a medium-term bullish factor, though the rupiah's weakness at 17,817 per dollar spurs Indonesian selling.

Market Dynamics and Price Outlook

Our model outlook sees near-term pressure from bearish fundamentals: July MPOB data showed rising stocks, peak production season is ongoing, and technicals are turning bearish. The market is likely to edge lower over the next 7 days, with positioning ahead of the next MPOB release. However, El Niño supply concerns and biodiesel demand provide a floor.

Indonesia's August reference price of $996.52 per ton acts as a policy anchor, potentially influencing export levies and competitiveness. Malaysian Palm Oil Council guidance suggests CPO prices will stay within the RM 4,400–4,650 range for August, which aligns with current levels.

Takeaway for Buyers

Watch the MPOB report for inventory inflection, and monitor El Niño developments in Sarawak and Kalimantan. Also keep an eye on India's import pace, biodiesel policy implementation, and crude oil price moves, as they will determine whether the current modest range holds or breaks.