Malaysian palm oil benchmark CPO settled at about $1,138 per tonne on 27 August, down 1.1% from the previous session, equivalent to RM 4,591 per tonne at a USD/MYR rate of 4.04. The World Bank benchmark stood near $1,101 per tonne and Indonesia's reference price around $997 per tonne, keeping the Malaysian contract at a premium to regional markers. Brent crude was flat at about $87 per barrel.

Malaysian supply picture

The latest MPOB release for July showed CPO production at 1,792,979 tonnes, a 9.4% month-on-month rise. Closing stocks climbed 7.2% to 1,429,316 tonnes, while palm oil exports surged 14.5% to 1,392,178 tonnes. Imports fell 51.9% to 49,566 tonnes. The stocks-to-use ratio printed at 12.5%, and the FFB reference was RM 49.50, up 1.2% on the month. Rising output and inventories are a near-term headwind, but the strong export pace suggests demand is absorbing much of the extra supply.

Indonesian supply and demand

Indonesia's June data reinforced the region's output recovery. GAPKI reported exports jumped 64% in June, with production and consumption also higher. Separate figures showed June production up 8.59% and biodiesel consumption reaching 1.13 million tonnes. Cumulative production through June reached 30.28 million tonnes. However, industry warnings tie severe El Niño to a possible contraction in CPO output, and Indonesian reports link forest fires and dry weather to lower production. The wet-season deficits in Sarawak, Sumatra/Riau and Kalimantan are consistent with an El Niño ONI of +1.4.

Policy and demand drivers

Indonesia's B50 biodiesel mandate remains a key support. Reports note that the programme may need review because of El Niño supply concerns, but for now the blend target underpins domestic palm oil use. Export levy revenue is projected at Rp41.22 trillion through end-2026, with expectations for a 31% rise, which could affect export economics. Meanwhile, the Indonesian rupiah has weakened despite high rates and a softer US dollar, adding to cost pressures.

Market tone and model outlook

Futures had closed lower earlier in the week on profit-taking and weaker crude oil, but technicals remain bullish. Our model outlook sees CPO consolidating around $1,140 after pulling back from the $1,162 high. El Niño supply fears, a wide BOPO discount and Indonesia B50 demand support an upward bias over the next seven days. The path published is +1.9% over seven sessions, with mild gains and consolidation expected around month-end as high Malaysian stocks and weak crude/rupiah cap upside.

What buyers should watch

Buyers will be watching rainfall deficits across Sumatra, Riau and Kalimantan, the pace of Malaysian stock drawdowns, and any updates on Indonesia's B50 timeline. Brent crude stability near $87 per barrel and the USD/MYR rate will also shape near-term price floors. The combination of high current stocks and El Niño supply risk leaves the market poised between consolidation and renewed upside, with month-end positioning likely to set the tone.