The Malaysian crude palm oil benchmark is trading around $1,143 per tonne on 21 August 2026, up 1.1% from the previous session and equal to RM4,619 per tonne at a USD/MYR rate of 4.04. The move extends a 3.7% rise over the past week and leaves the World Bank palm oil benchmark at about $1,101 per tonne, with Indonesia’s reference price near $997 per tonne. The ringgit exchange rate at 4.04 is a neutral influence, affecting dollar pricing but not driving direction today. Our model outlook is held flat at $1,148 per tonne from the 2026-08-20 close because no model view was available for this run, so we are not signalling a direction beyond that reference.
What is pushing palm oil up
The most immediate support is price momentum. Because the benchmark has already gained 3.7% over the past week, trend-following buying tends to reinforce the advance in the near term. Behind the move, bullish supply concerns are being priced in from El Niño conditions. With the Oceanic Niño Index at +1.4, palm-producing regions face elevated drought risk, and historical El Niño episodes affect yields with a six- to twelve-month lag. The current dry spell in Kalimantan, which recorded 0 mm of rainfall, is an early signal that fruit formation could be reduced in the months ahead. The seasonal production cycle adds to that argument: after a firmer August, September has historically softened by about 0.9%, so the market is looking past current high output toward a less burdensome supply period.
Energy markets are also helping. Brent crude is trading around $93 per barrel, up 1.5% over seven days despite a 0.1% slip today. Firmer oil raises the economic case for biodiesel blending, and palm oil is a key biodiesel feedstock. When crude stays elevated, biodiesel margins can draw more palm into energy use, tightening food and fuel competition. Finally, the vegetable oil spread is wide: palm oil trades at a $416 per tonne discount to soybean oil. That discount encourages price-sensitive buyers to switch to palm, supporting cash demand.
What is pushing palm oil down
The main drag is the realised supply picture in Malaysia. MPOB data for July showed CPO production up 9.4% month on month to 1,792,979 tonnes, about 4% above the five-year average. That output helped lift closing stocks by 7.2% to 1,429,316 tonnes, putting the stocks-to-use ratio at 12.5%, roughly 1.5 months of cover and above the usual range. Although July exports rose 14.5% month on month, it was not enough to prevent the stock build. More inventory available to buyers makes it harder for the market to sustain a sharp price premium. The technical picture also looks stretched. The 14-day RSI is at 74.2, above the typical overbought threshold, and the price is near the upper Bollinger band while the MACD histogram remains positive. That combination suggests the rally may be vulnerable to profit-taking or a corrective pullback, even if the broader bias is still positive.
Which side has the upper hand
On our factor balance, six drivers are bullish and three are bearish, so the upside currently has the upper hand. The bullish supply-risk story from El Niño and dry Kalimantan weather, combined with firm energy substitution and the deep discount to soybean oil, outweighs the bearish signals from high MPOB inventories, strong production and overbought technicals. For the balance to flip, the next supply data would need to show production accelerating further and stocks rising again without a matching export response, while the technical overbought signal would likely need to trigger a momentum break. A sustained pullback in Brent or a narrowing of the palm-soybean oil discount would also remove some of the supportive energy and demand arguments. Our model outlook remains flat at $1,148 per tonne, pending a fresh model run.