Indonesia export burden and El Niño keep palm oil near 52-week high despite ample July sto

Where the market sits Malaysian CPO benchmark is trading around $1,153/MT (RM4,661/MT), down 0.2% from the previous session, after holding near the 52-week high flagged by our model. The global World Bank palm oil benchmark is about $1,117/MT, while Indonesia's September reference price is about $1,008/MT. Brent crude is about $95/bbl, down 0.3% on the day but still up 5.6% over the past seven sessions. A modest pullback in Malaysian CPO has not changed the broader picture: buyers are still paying near the top of the range.

What is pushing it up The first bullish driver is Indonesian export policy. The September 1 reference price of $1,008/MT triggers a 12.5% ad valorem levy, worth about $126/MT, on top of a separate export duty of $148/MT from August. That totals roughly $274/MT in export costs. This makes Indonesian palm less competitive and shifts demand to Malaysian barrels, supporting the Malaysian benchmark.

The second is El Niño supply risk. The ONI is +1.4°C, and GAPKI expects 2027 output to fall by up to 3 million tonnes, or 2.9%. Palm has a lagged supply response of 6-12 months, so current El Niño conditions are not a spot supply shortage but a forward supply risk; the market is adding a weather premium now.

The third is the wide soy-palm spread. CBOT soybean oil is around $1,555/MT against CPO at $1,152/MT, leaving the BOPO spread at about $404/MT. Palm is heavily discounted, which encourages buyers to substitute palm for soybean oil and supports demand.

The fourth is biodiesel economics. Brent crude strength, with a seven-day gain of 5.6%, keeps the palm oil-gas oil spread at about -$329/MT, at the 0th percentile. Blending palm-based biodiesel is economic before mandates, and Indonesia's B40 program, with B50 phasing in, adds a structural demand pull on palm oil.

The fifth is technical momentum. RSI is 65, MACD is positive, the 5-day and 20-day SMAs have formed a golden cross, and price is above the 5, 20 and 50-day SMAs. The upper Bollinger band near $1,167 is near resistance, but the trend remains up.

What is pushing it down The first bearish driver is the ample July MPOB stock position. Malaysia's July closing stocks were 1,429,316 tonnes, up 7.2% month on month and 61% above the five-year average, with a stocks-to-use ratio of 12.5%. Production rose 9.4% month on month to 1,792,979 tonnes. That level of supply reduces the urgency to chase prices and gives buyers confidence to wait.

The second is September seasonality and the next MPOB release. September historically averages a 0.9% month-on-month decline in CPO, and the production path one month ahead is +7.0%. With the August MPOB release about eight days away, traders have an event risk that could confirm another stock build.

The third is Indonesian selling pressure tied to the rupiah. USD/IDR is around 17,770. A weaker rupiah lowers Indonesian exporters' costs in dollar terms and makes selling into export markets more attractive, increasing near-term supply and weighing on price. Extreme weakness could eventually trigger export-curbing policy, but for now it is a bearish flow.

Balance and what could flip it Our model's factor balance is five bullish against three bearish, so the upside has the upper hand. That is why our model outlook keeps CPO anchored at $1,152/MT (MYR 4,658) near the 52-week high, expecting choppy consolidation with modest upside into the August MPOB release, with a published path of +1.2% over seven sessions, though missing cargo-survey and Bursa data widen uncertainty.

The balance would flip if the August MPOB report shows a larger-than-seasonal production ramp or another stock build, if crude and soybean oil reverse lower while BOPO narrows, or if funds begin liquidating the crowded soyoil long at the same time Indonesian export selling intensifies.