Malaysian crude palm oil futures eased about 1.0% on the day to near $1,150/MT (RM 4,645/MT), snapping a five-session winning streak that had lifted prices more than 3% last week. The pullback came as traders booked profits and crude oil weakened 0.8% to about $85/bbl, trimming the appeal of palm-based biodiesel. The global benchmark stood near $1,101/MT, while Indonesia's reference price was around $997/MT, underscoring a wide spread between the two key producers.

Supply: MPOB July data points to rebuilding stocks

Malaysia's MPOB July report showed crude palm oil production at 1,792,979 tonnes, up 9.4% month-on-month, while closing stocks rose 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 stock build, though moderate, adds a bearish note. The fresh fruit bunch reference price edged up 1.2% to RM 49.50, reflecting still-firm grower returns.

Weather remains a key swing factor. The El Niño episode (ONI +1.4) continues to bring dry conditions to Sarawak and Kalimantan, raising concerns about future output. Our model outlook notes that a two-day stale anchor (Aug 24) and missing cargo surveyor and FCPO data widen uncertainty. The base case expects modest consolidation after the recent rally, with a wide BOPO spread ($330/MT) and Indonesian policy support underpinning prices, but the MPOB stock build and weaker crude capping upside.

Policy and demand: Indonesia's biodiesel push and export levies

Indonesia's biodiesel mandate remains a central pillar. Reports indicate the B50 program is accelerating, which supports domestic CPO absorption and helps sustain farmer-level TBS prices. Export levy revenue is projected to reach Rp 41.22 trillion this year, up 31%, according to multiple sources. This revenue is earmarked for replanting and downstream initiatives. However, a potential production shortfall of up to 5 million tonnes in 2027 looms, which could pressure export volumes.

Pricing power is also in the spotlight: Indonesia and Malaysia are jostling over benchmark mechanisms, with Indonesia clarifying that its trade ministry does not set export reference prices for CPO or coal. This regulatory ambiguity adds another layer of uncertainty for buyers.

Market outlook and what to watch

Technical indicators are bullish but overbought near the upper Bollinger band, suggesting mixed daily moves with a slight upward drift. Our model path projects +1.3% over the next seven sessions. For buyers, the key variables are the pace of Malaysian stock accumulation, the intensity of El Niño dryness in Borneo, and any further policy signals from Jakarta on biodiesel and export levies. A break above recent highs could extend gains, but profit-taking and softer crude remain headwinds.