Malaysian crude palm oil futures extended their rally on Monday, with the benchmark contract settling about 1.5% higher at approximately $1162/MT (RM 4688/MT), according to market data. The gain came despite a late-session dip as traders took profits after five consecutive sessions of advances, which had pushed prices to 52-week highs. The global benchmark, as tracked by the World Bank, stood at about $1101/MT, while Indonesia's reference price was set at roughly $997/MT.
Supply picture: ample stocks, peak production
The latest MPOB data for July 2026 showed Malaysian CPO production rose 9.4% month-on-month to 1,792,979 tonnes, while closing stocks climbed 7.2% to 1,429,316 tonnes. Exports jumped 14.5% to 1,392,178 tonnes, but imports fell sharply by 51.9% to 49,566 tonnes. The build in stocks and peak production season are typically bearish factors, yet prices have remained resilient, supported by strong biodiesel demand and weather concerns.
Weather: El Niño dries key regions
El Niño conditions persist, with the ONI index at +1.4. Notable rainfall deficits are reported in Sarawak and Kalimantan, key producing regions in Malaysia and Indonesia. Dry weather raises concerns about future yields, and some analysts warn of a more pronounced impact on Indonesian production by 2027. This supply risk is a key reason why many market participants expect prices to stay above RM4,600/tonne in September, as highlighted by MPOC and other forecasters.
Demand: biodiesel mandates and export levies
Indonesia's push for a B50 biodiesel mandate continues to underpin demand for palm oil as a feedstock. The country's export levy revenue is projected to reach Rp 41.22 trillion this year, a 31% increase, according to industry reports. Strong biodiesel consumption helps support farmer-level fresh fruit bunch prices, as noted in recent commentary. Meanwhile, India, the world's largest palm oil importer, has been increasing imports ahead of the festival season, though sunflower oil imports have been affected by war-related disruptions.
Market dynamics: pricing battle and currency moves
Indonesia has launched a national commodity exchange, challenging Malaysia's long-standing pricing dominance for palm oil. This could shift how benchmark prices are determined in the future. Currency movements also play a role: the Indonesian rupiah weakened to about 17,691 per dollar, while the ringgit traded at around 4.04 per dollar. A weaker rupiah can make Indonesian exports more competitive, but it also raises the cost of imported inputs.
Our model outlook
Our model outlook indicates that while CPO is at 52-week highs, the RSI at 78 and the prevalence of profit-taking headlines suggest a near-term pullback or consolidation. The wide BOPO spread, strong B50 mandate, and El Niño supply risks limit downside, while ample July stocks and peak production cap upside. We expect a modest net decline over the next 7 days, with a published path of +0.4% over 7 sessions.
Takeaway for buyers
Watch for profit-taking momentum and any shift in the Indonesia-Malaysia pricing dynamics. Also monitor weather updates in Sarawak and Kalimantan, as well as crude oil prices, which influence biodiesel blending economics. A break below key support could signal a deeper correction, but the structural demand from biodiesel and supply risks should keep the market supported in the medium term.