Malaysian CPO futures firmed on Friday, with the benchmark near $1,143 per tonne, or RM4,613, up 0.4% from the previous session. The World Bank palm oil reference was around $1,101 per tonne, while Indonesia's Kemendag reference price was about $997 per tonne. Brent crude slipped 0.2% to around $88 per barrel, and the ringgit traded at about 4.03 to the dollar. Our model outlook sees CPO consolidating near $1,146 with a mild upward bias, supported by El Niño supply concerns and a wide $419 BOPO discount, while ample July MPOB stocks, peak seasonality and weak Brent crude limit gains.
Malaysian supply data for July showed a seasonal build. 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, helping absorb some of the larger crop. Imports fell 51.9% to 49,566 tonnes, and the stocks-to-use ratio stood at 12.5%. The fresh fruit bunch reference price rose 1.2% to RM49.50 per tonne. Despite the heavier inventory, traders focused on weather risks. El Niño conditions are in place with an ONI of +1.4, and reports describe dry conditions in Sarawak and Kalimantan. Producer groups have warned that El Niño could cut Indonesian output, and some industry voices cautioned that without faster replanting, Indonesia could face a production shortage next year.
Demand signals remain mixed. Indonesia's B50 biodiesel programme is reportedly running smoothly, with authorities encouraging more FAME storage capacity. Indonesian palm oil exports jumped 64% in June, while production rose 8.59% and biodiesel consumption reached 1.13 million tonnes that month. The Malaysian Palm Oil Council said it expects CPO prices to hold above RM4,600 in September, citing tightening supply and geopolitical disruptions. However, projections of a bigger stockpile have kept prices steady at times, and weaker soybean futures contributed to an earlier decline in CPO.
Our model outlook points to choppy near-term trade. The published path is +1.1% over seven sessions. Key watchpoints are the upcoming MPOB August release and any missing cargo-surveyor export pace, as well as how El Niño dryness affects harvesting and how Brent crude moves shape biodiesel blend economics.
For buyers, the near-term picture balances a rising tide of Malaysian supply with dry-weather risks and policy-driven domestic demand in Indonesia. Monitor the August MPOB production and inventory report, Indonesian export and biodiesel consumption data, and rainfall updates for Sarawak and Kalimantan. A sustained drop in Brent crude or a surprise build in Malaysian stocks could test the current floor, while worsening dryness or stronger B50 uptake would add upside pressure.