Malaysian crude palm oil futures climbed to their highest level since 2024 on Wednesday, with the benchmark contract trading at about $1,130 per tonne (RM4,596), up 0.6% from the previous session. The rally extends a short-term uptrend driven by tightening supply expectations, robust biodiesel demand, and El Niño-related weather concerns.
Supply and demand drivers
Market sentiment is supported by forecasts from industry bodies. The Malaysian Palm Oil Council (MPOC) expects prices to remain above RM4,600 in September, citing tightening supply and geopolitical disruptions. BMI, a research unit, raised its 2026 average CPO price forecast to RM4,453, also on tight supply.
July data from the Malaysian Palm Oil Board (MPOB) showed 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, outpacing the production gain and underpinning the price strength. Imports fell sharply to 49,566 tonnes, down 51.9%.
El Niño and biofuel support
The current El Niño episode (ONI +1.4) is heightening supply concerns, with notably dry conditions in Kalimantan, a key Indonesian growing region. Dry weather can curb yields and tighten global availability.
At the same time, biodiesel blending mandates—B40 in Indonesia and B50 in Malaysia—are boosting palm oil demand for fuel. Higher crude oil prices, with Brent at about $94 per barrel (+2.9%), improve the economics of palm-based biodiesel.
Market outlook
Our model outlook indicates that CPO remains in a short-term uptrend, supported by a wide $417 per tonne discount to gasoil (BOPO), El Niño supply fears, and bullish commentary from MPOC and BMI. However, overbought technicals and ample July stocks may limit the pace of gains. The model's base case is modest gains over the next seven days, with occasional profit-taking, and a published path of +0.1% over seven sessions.
Uncertainty remains from missing cargo-surveyor export data and the palm-oil/gasoil spread (POGO), which could affect price direction. Buyers and traders should monitor these indicators closely.
Broader context
Global benchmarks show palm oil at about $1,101 per tonne (World Bank), while Indonesia's reference price stands at about $997 per tonne. The ringgit trades at 4.04 per dollar, and the rupiah at 17,802 per dollar.
Industry voices remain constructive. MPOC and BMI both point to sustained strength, with the latter's RM4,453 average forecast for 2026 suggesting prices will stay elevated through the year.