Malaysian crude palm oil futures ended lower on profit-taking and weaker crude oil, with the benchmark easing 1.0% to about $1,139 per metric ton (RM 4,596) in the previous session. The move tracked softer vegetable oil markets and a pullback from recent highs, while Brent crude held near $87 per barrel, offering little support to biodiesel blend economics.
The global benchmark stands near $1,101/MT, and Indonesia's reference price is about $997/MT. Our model outlook sees near-term rangebound trade with mild upside, as ample Malaysian stocks and peak production pressure offset a wide BOPO discount, El Niño warnings, and B50 demand. The published path suggests a +1.5% move over seven sessions, though missing cargo-surveyor and Bursa FCPO data widens uncertainty.
Supply: Stocks build, El Niño looms
New MPOB data for July 2026 shows Malaysian palm oil stockpiles rose 3.32% to 2.63 million tonnes, confirming high inventories that temper El Niño-driven supply fears. This aligns with earlier figures showing CPO production up 9.4% month-on-month to 1,792,979 tonnes and closing stocks up 7.2% to 1,429,316 tonnes. Exports jumped 14.5% to 1,392,178 tonnes, while imports fell sharply by 51.9% to 49,566 tonnes. The FFB reference price edged up 1.2% to RM 49.50.
Dry weather across key growing regions keeps supply worries alive. Sarawak, Sumatra/Riau, and Kalimantan are all experiencing dry conditions, consistent with an El Niño (ONI +1.4). Indonesian smallholder fresh fruit bunch production has reportedly dropped up to 20%, and industry warns that severe El Niño could shrink output. These weather risks are prompting calls to review Indonesia's B50 program, as land and forest fires (karhutla) compound production losses.
Demand and policy crosscurrents
Indonesia's push toward B50 biodiesel remains a key demand pillar, with June 2026 consumption reaching 1.13 million tonnes. GAPKI data show Indonesian palm oil exports surged 64% in June, while production rose 8.59%. Export levy revenue is projected at Rp 41.22 trillion for 2026, up 31%, reflecting strong trade flows. However, a softer rupiah (around 17,689 per dollar) and sluggish recent export demand may temper enthusiasm.
Pricing authority is also in focus. Indonesia's trade ministry has clarified it lacks authority to set reference export prices for CPO and coal, while a broader pricing battle with Malaysia continues over benchmark mechanisms. These policy dynamics add another layer of uncertainty for traders.
Outlook: Bullish bias next week
Despite Monday's profit-taking, market participants expect CPO futures to stay bullish next week, supported by El Niño supply concerns, B50 demand, and a wide BOPO discount. High Malaysian stocks and weak crude oil may cap gains, but the overall bias remains constructive. Watch for further weather-related production downgrades and any policy shifts on Indonesian export levies or B50 implementation, alongside rupiah and crude trends.