Malaysian crude palm oil futures edged up 0.4% to about $1,143/MT (RM 4,613) on Friday, holding near recent highs as El Niño-driven supply concerns and biodiesel demand offset fresh bearish stock data. The global benchmark sits near $1,101/MT, while Indonesia's reference price is $997/MT. Brent crude held at $88/bbl, keeping biodiesel blending economics supportive.
Supply: El Niño warnings reinforce output fears
Indonesian and Malaysian authorities are stepping up support for smallholders facing El Niño. The Malaysian Palm Oil Board (MPOB) and the Malaysian Anti-Corruption Commission (KPK) are ready to help smallholders mitigate the impact, according to Plantation and Commodities Minister Noraini. This follows an industry warning that a severe El Niño could shrink crude palm oil output, adding concrete supply-side confirmation to the fears underpinning today's gains.
The current El Niño (ONI +1.4) is curtailing rainfall in key growing regions of Sarawak and Kalimantan, where dryness persists. The authorities' assistance programs—likely including replanting support and best-practice guidance—aim to buffer production losses. This aligns with earlier statements about the risk of a production deficit next year if replanting is not accelerated.
Malaysia's MPOB data for July 2026 showed stockpiles rose 7.2% month-on-month to 1,429,316 tonnes, a modest build that nonetheless adds to near-term bearish pressure. Production climbed 9.4% month-on-month to 1,792,979 tonnes, while exports jumped 14.5% to 1,392,178 tonnes. Imports fell sharply by 51.9% to 49,566 tonnes. The stock increase is a headwind, but the market is looking past it toward tightening supply.
Demand: B50 and biodiesel
Indonesia's B50 biodiesel program continues to expand, with recent outreach efforts highlighting its role in the energy transition. This is a structural demand boost for palm oil, as is the wider shift of palm oil into energy markets. The program is seen as a potential game-changer, reshaping Indonesia's energy and palm oil landscape.
However, demand signals are mixed. CPO futures closed lower in some sessions amid weaker soybean futures, and China's vegetable oil stocks are rising, pressuring prices. Soybean oil futures fell 7% after the EPA extended the RFS compliance deadline. These factors could cap gains, but the wide BOPO spread and supply warnings may limit pullbacks.
Price outlook: weekly streak at risk
Our model outlook expects a choppy, slightly positive bias over the next 7 days, with a published path of +1.3%. The uptrend is technically intact, but price is near the upper Bollinger band and soyoil positioning is crowded, raising correction risk. Prices are expected to rise on tight supply and biodiesel demand, with MPOC projecting CPO to stay above RM 4,600 in September amid geopolitical disruptions.
Takeaway for buyers
Watch El Niño's impact on Southeast Asian rainfall and any policy moves on Indonesia's B50 mandate. The market is balancing near-term stock builds against longer-term supply concerns, so expect volatility with a mild upward bias. Keep an eye on the USD/IDR rate (17,756) and export taxes, as they affect Indonesian competitiveness.