Malaysian crude palm oil futures settled near $1,144/MT (RM 4,613) on Sep 1, up a marginal 0.2% from the prior session, as the market digested a mixed fundamental picture. The global World Bank benchmark stood at about $1,101/MT, while Indonesia's Kemendag reference price was set at roughly $997/MT for the month, slightly below the $1,007.51/MT figure flagged in late-August headlines.

Supply: El Niño vs. Stock Builds

The dominant supply narrative remains the strengthening El Niño, with the ONI at +1.4 and notable dryness across Sarawak, Sumatra/Riau and Kalimantan. Producer groups in Indonesia have warned of output crimps, and Malaysian authorities have offered smallholder assistance programs to mitigate the impact. This weather premium helped CPO futures rebound on Aug 28 after a dip on weaker soybean markets the prior day.

However, the latest MPOB data for July 2026 showed Malaysian CPO production at 1,792,979 tonnes, up 9.4% month-on-month, while closing stocks rose 7.2% to 1,429,316 tonnes. Exports were robust at 1,392,178 tonnes (+14.5% MoM), but imports fell sharply to 49,566 tonnes (-51.9% MoM). The FFB reference price edged up 1.2% to RM 49.50. The stock build tempers some of the bullish weather narrative, and the market is watching for August data due in roughly two weeks, which may show another increase.

Demand: B50 and Energy Crossover

Indonesia's B50 biodiesel program continues to underpin demand. Headlines indicate the blend has reached 90% of Pertamina fuel stations, and the country is developing D100, a 100% palm-based diesel, as a new energy security tool. This comes alongside projections that CPO prices could average $1,650–1,720/tonne in 2027 as biodiesel uptake rises. Brent crude's 3.6% jump to about $92/bbl strengthens the economics of palm-based fuels, widening the BOPO spread and supporting price floors.

Market Positioning and Outlook

Our model outlook notes the anchor is five days stale (Aug 27 close at $1,143/MT), and the Aug 28 rebound on El Niño concerns suggests current prices may be higher than that reference. The near-term mix is balanced: strengthening El Niño, Indonesian B50 demand, a wide BOPO spread, and MPOC's upbeat September outlook (prices above RM 4,600) are supportive. On the bearish side, ample July stocks, a potential August build, crowded CFTC net long positioning, and weak September seasonality could trigger profit-taking. The base case is mild bullish drift with a range of roughly $1,140–$1,165, with a published path of +1.5% over seven sessions.

Takeaway for Buyers

Watch the August MPOB data (due ~mid-September) for stock confirmation, monitor El Niño rainfall updates in Sarawak and Kalimantan, and track B50 implementation milestones. A break above $1,165 would signal renewed weather premium; a weak stock report could pressure prices toward the lower end of the range.