Price pulse

Malaysian CPO benchmark held around $1,153/MT (RM4,663/MT), a 0.1% advance on the previous session, but the contract is near 52-week highs and stretched against the upper Bollinger band. The World Bank palm oil benchmark was about $1,117/MT, while Indonesia's September reference price rose 1.1% to $1,007.51/MT, with the CPO export duty unchanged at $148/MT. Brent crude added 0.5% to roughly $96/bbl, and the palm-to-soyoil discount implied by a BOPO spread of $372/MT remains supportive for discretionary palm demand. The ringgit traded near 4.04 per dollar, influencing local export conversion.

Supply and demand crosscurrents

MPOB's July release showed production up 9.4% month-on-month to 1,792,979 t, exports up 14.5% to 1,392,178 t, and closing stocks up 7.2% to 1,429,316 t. Our model outlook notes these July stocks are 61% above the five-year average, and the next MPOB release in about seven days is widely expected to show another inventory build; a market preview flags August inventories hitting a seven-month high. Weak soybean oil and higher stock expectations already pulled CPO futures lower in a recent session.

Offsetting that, Indonesia's B50 biodiesel mandate is now officially in effect, with distribution reaching 80% and covering 90% of Pertamina stations. Brent's weekly gain of 8.8% improves blend economics. At the same time, El Niño conditions (ONI +1.8) and dry conditions in Sarawak are raising 2027 supply worries; Gapki projects Indonesia's 2027 palm oil output could decline 2.9%. Policy concerns add another layer: Gapki has cautioned against raising CPO export levies because that could pressure farmer fresh fruit bunch prices. Separately, news reports pointed to improved Indonesian palm oil export performance, a potential sign of healthy shipments.

Near-term outlook

Our model outlook sees choppy trade over the next week, with a slight downside bias into the MPOB data but demand-side support limiting losses. September seasonality averages a 0.9% month-on-month decline, and crowded CFTC soyoil longs are vulnerable to liquidation. Missing cargo-surveyor export pace and Bursa FCPO quotes widen uncertainty, though the published path is a 0.3% gain over seven sessions.

For buyers, the critical watchpoints are the MPOB stock and export figures, daily cargo-surveyor shipments, B50 blending progress, and any shift in El Niño or biodiesel policy signals.