Palm Oil Holds Near $1,107 as Biodiesel and El Niño Offset Seasonal Stocks Build

Malaysian CPO benchmark is about $1,107/MT, up 0.1% from the previous session and equivalent to RM 4,525/MT at USD/MYR 4.08. The global palm oil benchmark is about $1,101/MT, while Indonesia's Kemendag reference is about $1,030/MT. Brent crude is about $89/bbl, down 0.2% on the day. CPO is consolidating after July MPOB data showed production of 1,792,979 tonnes (+9.4% MoM), closing stocks of 1,429,316 tonnes (+7.2% MoM), exports of 1,392,178 tonnes (+14.5% MoM), and a stocks-to-use ratio of 12.5%. Our model outlook describes the market as consolidating around $1107 and expects a modest upward drift over the next seven trading sessions, with daily moves likely muted within the $1093-$1117 Bollinger band.

What is pushing CPO higher

The wide BOPO spread is a key demand-switching mechanism. With soyoil around $1,581/MT and CPO around $1,107/MT, the $475/MT discount makes palm heavily discounted against soy oil. Price-sensitive importers can shift some demand from soy to palm, supporting palm even when the broader vegoil complex is rangebound.

Indonesia's B50/B100 biodiesel headlines are tightening the medium-term export picture. The government is betting on B50 and palm to cut diesel imports, and moving from B40 to B50 would absorb an additional 3–4 million tonnes per year of domestic palm supplies that would otherwise be exported. That reduces the exportable surplus and helps underpin global CPO prices.

El Niño supply risk is being priced through a 6–12 month yield lag. ENSO ONI is +1.4°C, with dry conditions in Kalimantan and Sarawak adding stress to production areas. Buyers may be positioning now for future shortfalls, even before they show up in crop data, which supports bids during the current harvest.

The short-term technical picture is constructive. RSI is neutral at 52, but MACD is positive and the 5/20-day SMA has crossed bullishly. Price is above its 5, 20 and 50-day SMAs and capped near the Bollinger upper band at $1117, so trend-following buyers see a supportive near-term trend.

India's edible oil import demand remains large. July edible oil imports hit a 10-month high on strong demand, supporting near-term palm offtake. A conflicting report suggests a monthly decline, but the import base is still substantial enough to absorb cargoes.

What is pushing CPO lower

The MPOB July stock build and peak production season are the main bearish overhang. Production rose 9.4% MoM and closing stocks rose 7.2% to 1,429,316 tonnes, with a 12.5% stocks-to-use ratio. The seasonal path projects production +7% and stocks +11.2% one month ahead, meaning more supply is entering storage during the peak harvest period. That gives buyers less urgency to chase prices.

Brent crude weakness is undermining biodiesel economics. Brent is near $89/bbl, down 0.2% on the session and roughly 4.6% lower over the past week. Lower crude weakens the POGO spread and the price at which palm-based biodiesel remains attractive, reducing the biofuel demand leg for CPO. This was cited in the Aug 13 pressure from lower crude and rival oils.

Soyoil's crowded speculative long adds risk. CFTC managed money is net long +80,922 contracts in soyoil, at the 80th percentile and up 241 weekly. That positioning is vulnerable to liquidation if CBOT or Dalian soyoil falls. A soyoil decline would narrow the $475 BOPO discount and remove a support leg for CPO.

A weak rupiah encourages Indonesian selling. USD/IDR at 17,855 means Indonesian exporters receive more rupiah per dollar, so they can be aggressive in dollar terms while still improving local margins. That adds regional supply pressure and weighs on the market near term.

Which side currently has the upper hand

On balance, our model counts five bullish drivers against four bearish, so the upside currently has the upper hand. The bullish biodiesel and El Niño supply-risk news is doing just enough to offset the seasonal stock-build pressure. Our model outlook expects a modest upward drift over the next seven trading sessions, with daily moves staying muted within the recent $1093-$1117 Bollinger band. The main uncertainty is the missing cargo-survey export pace and live FCPO quotes.

A bearish flip would require sustained Brent weakness, a meaningful narrowing of the BOPO spread through soyoil long liquidation, and continued aggressive Indonesian export sales while MPOB stocks keep building. The upside case would strengthen if Indonesia's B50/B100 policy moves from headlines to binding mandates, India's import demand remains strong, and El Niño damage becomes more visible in production data.