Malaysian crude palm oil futures closed near $1106 per tonne (RM 4529), down 0.2% on the session, after touching four-month highs earlier in the week. The global benchmark sits at about $1101, while Indonesia's reference price is around $1030. The market is consolidating after a crude-led rally, with Brent up 0.5% to about $90 per barrel.
Supply: Stocks and Production Rise
The latest MPOB data for July show Malaysian CPO production at 1,792,979 tonnes, up 9.4% month-on-month, while closing stocks rose 7.2% to 1,429,316 tonnes. Exports jumped 14.5% to 1,392,178 tonnes, reflecting strong demand, but imports fell sharply by 51.9% to 49,566 tonnes. The higher stocks and peak production season are capping price gains, even as the export surge points to robust buying.
Weather: El Niño Risk Looms
ENSO conditions are in El Niño territory, with ONI at +1.4. Kalimantan is notably dry, raising concerns about future output. Our model outlook notes that a developing El Niño offers lagged bullish support, but the immediate impact is muted by current high stocks. Market watchers are debating when the 'inventory inflection point' will arrive, as highlighted in recent previews.
Demand: Crude and Biodiesel
Firm crude oil prices are underpinning biodiesel economics, with Indonesia, Malaysia, and Thailand having raised mandates for 2026. Indonesia's B50 program, rolled out by Pertamina, is a key driver. India's vegetable oil imports surged 13% in July, with palm oil demand accelerating, and imports are expected to stay strong ahead of festivals. However, rival oils in China are weakening, pressuring palm oil sentiment.
Price Outlook
Our model outlook expects modest upward drift over the next seven sessions, with crude as the primary driver. Position squaring and technical resistance near recent highs are likely to limit gains. The published path is +0.2% over the week.
What to Watch
Buyers should monitor crude oil movements, as they directly influence biodiesel demand and palm oil's competitive position. Also watch for any further dryness in Kalimantan, which could tighten supply expectations. The balance between strong exports and rising stocks will be key in the near term.