Malaysian crude palm oil futures extended their winning streak, with the benchmark contract closing about 1.2% higher at $1,144/MT (RM 4,626). This marks the fifth consecutive weekly gain, according to Bernama, pushing prices to levels not seen since 2024. The global benchmark, as tracked by the World Bank, stands at $1,101/MT, while Indonesia's reference price is set at $997/MT. Brent crude's 0.6% rise to $94/bbl adds further support, improving the economics of palm-based biodiesel blends.

Supply: July stocks build, but El Niño looms

MPOB data for July shows Malaysian CPO production rose 9.4% month-on-month to 1,792,979 tonnes, while exports jumped 14.5% to 1,392,178 tonnes. Closing stocks increased 7.2% to 1,429,316 tonnes, still ample but below market expectations. Notably, imports plunged 51.9% to 49,566 tonnes, reflecting tight regional supply. The FFB reference price edged up 1.2% to RM 49.50.

However, the supply outlook is clouded by a strengthening El Niño (ONI +1.4), with Kalimantan experiencing dry conditions. Indonesian producers are bracing for potential output losses, with some projections pointing to severe impacts in 2027. The Malaysian Palm Oil Council (MPOC) expects prices to stay above RM 4,600/tonne in September, citing tightening supply and geopolitical disruptions.

Demand: B50 mandate and export levies

Indonesia's push for B50 biodiesel remains a key demand driver. The country's export levy collections are projected to reach Rp 41.22 trillion this year, a 73% increase, as the government funds the mandate. BPDP claims B50 is not hurting export volumes, while plantation companies are seeking higher yields to meet feedstock needs. The campaign to educate stakeholders, including scouts, underscores the policy's strategic importance.

Global vegetable oil demand stays robust, with India's imports rising ahead of the festival season and the FAO vegetable oil price index hitting its highest since June 2022. However, competition from record South American soybean oil exports and rising rapeseed prices could temper gains.

Price outlook: overbought but supported

Our model outlook indicates a strong uptrend driven by B50, a wide BOPO spread, and El Niño risk premium. However, technicals are overbought (RSI 73, above upper Bollinger), and July stocks are ample. The near-term base case is a mild pullback or consolidation followed by renewed buying, with net modest gains over 7 days. The published path is +1.1% over seven sessions, but uncertainty is elevated due to stale anchor data and lack of cargo surveyor figures.

Takeaway for buyers

Watch for consolidation in the near term, but keep an eye on El Niño developments in Kalimantan and Indonesia's biodiesel policy execution. Any supply disruption could reignite the uptrend, while a correction may offer buying opportunities.