Malaysian crude palm oil futures held near 52-week highs on Wednesday, with the benchmark contract at about $1,152/MT (MYR 4,660), down 0.2% from the previous session. The global benchmark was around $1,117/MT, while Indonesia's reference price for September 2026 rose to $1,007.51/ton, reflecting tighter supply expectations amid El Niño and the country's B50 biodiesel policy. The ringgit traded near 4.04 per dollar, and Brent crude was about $95/bbl, lending support to biodiesel economics.
Supply: Stocks Build, But El Niño Looms
Malaysia's July MPOB data showed production at 1.79 million tonnes, up 9.4% month-on-month, while closing stocks rose 7.2% to 1.43 million tonnes. Exports jumped 14.5% to 1.39 million tonnes, but imports fell sharply by 51.9% to just under 50,000 tonnes. The stock build was larger than some expected, yet the market shrugged off the bearish signal as forward supply concerns dominate.
El Niño conditions persist, with the ONI index at +1.4, and rainfall across key belts is broadly normal for now. However, Indonesian producer group GAPKI warns that El Niño could cut output, with 2027 production potentially declining by 2.9% to 56.8 million tonnes. GAPKI is urging accelerated replanting (PSR) to avoid a supply deficit next year, and Malaysian authorities, including KPK and MPOB, are helping smallholders mitigate El Niño impacts.
Demand and Policy: B50, Reference Price, and Export Strength
Indonesia's September 2026 CPO reference price rose to $1,007.51/ton, up from the prior month, aligning with tighter supply expectations driven by El Niño and the B50 biodiesel mandate. The government is also assessing crude palm oil supply for a B60 rollout slated for 2027, consolidating feedstock and technical specifications. Acceleration of biodiesel mandates is seen as a structural demand boost, though some analysts warn of higher costs and potential upward pressure on domestic cooking-oil prices.
Market Drivers: Weaker Soybean Oil Weighs, MPOC Sees Support
CPO futures closed lower today, tracking weaker soybean oil futures in the broader oils complex. Despite this, the Malaysian Palm Oil Council (MPOC) expects prices to stay above MYR 4,600 in September, citing tightening supply and geopolitical disruptions. Crude oil strength above $95/bbl improves the competitiveness of palm-based biodiesel versus fossil diesel, underpinning the bullish policy narrative. Palm oil's discount to soybean oil remains attractive, supporting import demand from key buyers.
Outlook and What to Watch
Our model outlook sees CPO anchored near $1,152/MT (MYR 4,658) and expects choppy consolidation with modest upside into the August MPOB release. The published path is +0.5% over seven sessions. Missing cargo-survey data and Bursa Malaysia trading updates are widening uncertainty, and the market is sensitive to any shift in weather forecasts or biodiesel policy details.
Takeaway for buyers: The market is balancing near-term ample stocks against a tightening supply outlook and firm energy prices. Watch for August MPOB data, Indonesia's B50/B60 implementation timelines, and any renewed El Niño dryness in the coming weeks—these will set the tone for price direction into Q4.