Malaysian crude palm oil futures settled around $1,152/MT on 8 September, up 0.7% on the session, tracking firmer rival vegetable oils and stronger crude prices. Brent crude hovered near $97/bbl, underpinning biodiesel blending economics and supporting palm's energy-linked demand. The global benchmark stood at about $1,117/MT, while Indonesia's reference price for September was set at roughly $1,008/MT, with export levies unchanged at $148/MT despite the higher reference.
Supply: Stocks Rising, Output Seasonal
Malaysia's July MPOB data showed 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 jumped 14.5% to 1,392,178 tonnes, reflecting robust buying ahead of seasonal demand. Imports fell sharply to 49,566 tonnes, down 51.9%. The market now awaits August data, which is expected to show stocks at a seven-month high as peak production continues.
Weather remains a key risk. El Niño conditions (ONI +1.8) are still in force, with notably dry weather in Kalimantan raising concerns about output and haze-related disruptions in Indonesia. These worries have supported prices despite the near-term supply build.
Demand: Biodiesel and Policy Support
Indonesian biodiesel policy continues to underpin demand. The B50 mandate is set to expand in 2027, and the government is preparing for B60 trials. Industry groups warn that palm supply may be a constraint, with 2027 output projected to fall 2.9%. Export growth from Indonesia was reported at 5.49%, and the government is pushing downstream processing. Meanwhile, Malaysia's MPOB has launched PALMS 2030 to boost digitalization and traceability, and a used cooking oil price portal to support circular economy initiatives.
Crude oil strength is a direct support for biodiesel economics, making palm-based fuel more competitive. The spread between palm and gasoil (BOPO) stands at $385, favoring biodiesel blending.
Market Outlook: Choppy Drift
Our model outlook sees CPO near 52-week highs with bullish demand-switching, high crude/biodiesel support, and El Niño/haze supply risks. However, upcoming MPOB August data (expected to show a seven-month high in stocks) and seasonal peak output create near-term headwinds. We expect a choppy, slightly positive drift with a likely data-driven dip. The published path is +1.2% over the next seven sessions.
Key Watch for Buyers
Watch the MPOB August report for stock levels and export trends, as well as any weather updates from Kalimantan. Also monitor Indonesian biodiesel policy announcements and crude oil movements, as these will drive price direction in the near term.