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Asia Biofuels Update: Palm Oil Down on High Stocks; Weekly Gain Expected

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Malaysian palm oil futures eased on Friday as high inventories in Malaysia and Indonesia continued to weigh on sentiment, although prices were on track for a weekly gain amid a strong global energy market that boosts biofuel competitiveness.

The Bursa Malaysia Derivatives' August crude palm oil contract was down 0.44% to 4,517 Malaysian ringgit ($1,107.05) per metric ton, but was headed for a 0.92% weekly rise.

In a similar manner, the September contract lost 0.44% to 4,554 ringgit/mt, but was set to gain 0.91% over the week.

Malaysian palm oil stocks grew to their highest level since March at 2.5 million metric tons in June, according to industry data, as an increase in output offset a rebound in exports.

In Indonesia, May inventories reportedly rose 18.9% from a month earlier to 3.0 mmt, as exports slumped.

Persisting high stocks in top producing countries are pressuring the market, according to Sunvin's commodity research head Anilkumar Bagani, as cited by Reuters. This indicates a relatively weak demand at a time when production is seasonally high.

Palm oil purchases by top importer India reportedly plunged to a 14-month low in June and declined 11% month over month, as demand weakened due to a narrowing discount of palm oil to other rival oils.

In the EU, palm oil imports during the 2025/26 marketing year dropped around 5% to 2.9 mmt, after policy changes that excluded palm-oil based biofuels from tax incentives, Biofuels International reported.

Despite these downsides, industry data showed that Malaysia's exports recovered 6.2% in June from a month earlier. Preliminary estimates by cargo surveyors reportedly showed that shipments increased further between 4% and 12.4% in the first 15 days of July.

The government has kept the export duty for crude palm oil at 10% in August, as reference price rose to 4,412.19 ringgit/mt from the prior month's 4,346.79 ringgit/mt, according to a notification from the Malaysian Palm Oil Board.

Going forward, analysts expect that palm oil will remain supported as output tapers down seasonally toward Q4 and due to the El Nino weather phenomenon, while Indonesia's exportable supplies tighten due to the progressing B50 mandate.

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