Malaysian crude palm oil futures extended gains for a fourth straight session, with the benchmark contract closing about 1.1% higher at approximately $1,143 per metric ton (RM 4,619). That puts prices near the highest levels in 20 months, supported by supply concerns and firm energy values. Brent crude edged up 0.3% to around $94 per barrel, underpinning biodiesel blending economics and adding a cost floor to vegetable oil markets.

Supply: Output Rises, but Stocks Stay Lean

MPOB's July report showed Malaysian CPO production at 1,792,979 tonnes, up 9.4% month-on-month, while exports surged 14.5% to 1,392,178 tonnes. Closing stocks rose 7.2% to 1,429,316 tonnes—still historically tight relative to demand. Imports fell sharply, down 51.9% to 49,566 tonnes. The FFB reference price edged up 1.2% to RM 49.50, reflecting firmer ex-mill values.

Weather remains a key risk. ENSO is in El Niño territory (ONI +1.4), with notable dryness across Kalimantan. Industry voices, including Malaysia's SD Guthrie, warn that El Niño could dent output into 2027-28. Indonesia's own production outlook is also seen as flat, raising concerns about feedstock availability for the B50 biodiesel program.

Demand and Policy: B50 and Export Levies

Indonesia's push to B50 biodiesel is a central theme. The country's export levy rose 73%, according to BPDP, and the replanting subsidy was increased to Rp 60 million per hectare. However, analysts at Bloomberg Technoz caution that El Niño and flat production could erode the biodiesel fund's buffer, potentially straining subsidy payouts. Indonesia's state plantation company is looking to raise yields to secure feedstock.

On the demand side, India's cooking-oil imports are climbing ahead of the festival season, though sunflower oil imports have been hit by war-related disruptions. Soybean oil exports from Argentina and Brazil hit a record high, offering competition but also reflecting strong global vegetable oil appetite.

Price Outlook: Firm Above RM 4,600

Multiple Malaysian sources, including MPOC, expect CPO to hold above RM 4,600 per tonne in September, citing tightening supply and geopolitical disruptions. BMI raised its 2026 average CPO price forecast to RM 4,453. Our model outlook holds flat at the 2026-08-20 close of $1,148, as no directional view was available for this run.

Takeaway for Buyers

Watch Indonesia's biodiesel fund sustainability and weather updates in Kalimantan—both could trigger sharp price moves. With stocks lean and El Niño still in play, the market's risk premium is unlikely to fade quickly.