Malaysian crude palm oil futures capped a fifth consecutive weekly gain, with the benchmark contract climbing to a 20-month high near RM4,977 per tonne. The latest session saw prices settle about 1.2% higher at approximately $1,158 per tonne (RM 4,684), according to market data. The sustained advance is being driven by Indonesia's push toward the B50 biodiesel mandate and persistent El Niño-related supply risks across key growing regions.
The global benchmark, as tracked by the World Bank, stands near $1,101 per tonne, while Indonesia's reference price is around $997 per tonne.
Supply: stocks build but weather and policy loom
Data from the Malaysian Palm Oil Board for July show production rose 9.4% month-on-month to 1,792,979 tonnes, while closing stocks increased 7.2% to 1,429,316 tonnes. Exports jumped 14.5% to 1,392,178 tonnes, a sign of robust buying interest, though imports fell sharply by 51.9% to 49,566 tonnes. The FFB reference price edged up 1.2% to RM 49.50.
Despite the stock build, market attention is fixed on the weather. The El Niño episode, with an ONI of +1.4, is bringing dry conditions to key growing areas in Sarawak and Kalimantan, raising concerns about output in the coming months. The Malaysian Palm Oil Council (MPOC) projects that CPO prices will stay above RM4,600 in September on tightening supply and geopolitical disruptions. BMI has also raised its 2026 average CPO price forecast to RM4,453 on tight supply.
Our model outlook notes that the recent surge has pushed prices above the upper Bollinger Band, with RSI at 77 indicating overbought conditions. The model expects modest net gains over the next seven sessions, with intermittent profit-taking and elevated volatility, and a published path of +1.6%.
Demand: biodiesel and India
Indonesia's push toward the B50 biodiesel mandate remains a key demand driver. News flow highlights continued development of Caterpillar equipment for B50 use and educational campaigns by industry groups. Export levy collections are projected at Rp 41.22 trillion this year, reflecting both higher volumes and elevated prices. India, the world's largest palm oil importer, continues to show active demand for edible oils ahead of the festival season, though sunflower imports have been affected by the war in Ukraine. Soybean oil exports from Argentina and Brazil hit a record high, which could provide competition, but the soy-palm spread remains wide enough to keep palm attractive.
Energy and currency
Brent crude is trading around $93 per barrel, down 0.8% on the session. Firm crude prices support biodiesel blending economics, making palm oil more competitive as a fuel feedstock. The ringgit is at about 4.04 per dollar, while the rupiah is around 17,667 per dollar. A weaker ringgit makes Malaysian exports more affordable, but the impact is muted by the strong price rally.
Outlook and what to watch
Market participants are weighing bullish headlines—including BMI's raised 2026 average CPO forecast and MPOC's September projection—against technical signals of overbought conditions and ample July stocks. The next week is likely to see consolidation, with profit-taking potentially capping gains. Buyers should watch for any shift in Indonesia's export levy policy, the pace of B50 implementation, and weather updates from Sarawak and Kalimantan. A break above the recent high could signal further upside, while a failure to hold support near RM4,600 may invite a sharper correction.