Malaysian crude palm oil futures extended their rally, with the benchmark contract settling around $1,144 per metric ton, up 1.2% from the previous session. In ringgit terms, that is approximately RM 4,626/MT. The gain marks a fifth consecutive weekly advance, with prices hovering near levels not seen since 2024, according to market reports. The global benchmark, as tracked by the World Bank, stands at about $1,101/MT, while Indonesia's reference price is lower at roughly $997/MT, reflecting differing supply and policy dynamics across the two major producers.

Supply: El Niño and Stocks

The supply picture remains tight. Malaysia's MPOB data for July shows production at 1,792,979 tonnes, up 9.4% month-on-month, but that increase is being offset by strong export demand. Exports surged 14.5% to 1,392,178 tonnes, helping keep closing stocks at 1,429,316 tonnes, up only 7.2% despite the production jump. Imports fell sharply to 49,566 tonnes, down 51.9%.

Weather remains a key risk. The El Niño episode (ONI +1.4) is bringing dry conditions to Sarawak and Kalimantan, raising concerns about future yields. Several reports warn that the impact could extend into 2027, with the worst effects yet to come. The Malaysian Palm Oil Council (MPOC) has projected prices staying above RM 4,600 in September, citing tightening supply and geopolitical disruptions.

Demand: Biodiesel and Imports

Indonesia's aggressive biodiesel mandate, B50, continues to underpin demand. The country's export levy is projected to reach Rp 41.22 trillion this year, up 73%, according to reports, as the government funds the program. However, analysts warn that El Niño could erode feedstock supply, putting strain on biodiesel stocks. State plantation companies are reportedly seeking higher yields to support the program.

India, the world's largest palm oil importer, is boosting purchases ahead of the festival season, adding to demand pressure. The country's overall cooking-oil imports have jumped, although sunflower oil imports are lagging due to war-related disruptions. This active buying from India is providing support to palm and soybean oil quotes, as noted in market reports.

Energy and Other Drivers

Brent crude held steady at about $94 per barrel, which supports biodiesel blending economics and keeps vegetable oil prices competitive as fuel. The weaker ringgit (around 4.04 per dollar) also makes Malaysian exports more attractive.

Our model outlook sees a bullish trend but warns of short-term pullback risk. The market is stretched, with wide BOPO (basis over palm oil), a Brent rally, El Niño, and Indonesian policy all supporting prices, while overbought RSI and peak-season stocks suggest consolidation. The base case is a modest upward drift, with a published path of +1.6% over seven sessions.

What to Watch

Buyers should monitor weather developments in Sarawak and Kalimantan, as any intensification of dryness could tighten supply further. Also watch Indonesia's biodiesel policy updates and the pace of Indian imports. The market is likely to consolidate near current levels, but any supply shock could push prices higher.