PALMOILMAGAZINE, JAKARTA – Indonesia’s crude palm oil (CPO) market is entering the second half of 2026 with a combination of domestic and international factors supporting prices. While the country’s mandatory B50 biodiesel program, scheduled to take effect in July, is expected to significantly increase domestic CPO consumption, PT Kharisma Pemasaran Bersama Nusantara (KPBN) believes global market dynamics—particularly Malaysian export performance—continue to have the strongest influence on short-term price movements.
According to KPBN, the implementation of the B50 mandate has begun shaping market expectations that higher biodiesel demand will reduce domestic CPO inventories, providing additional support for prices. However, recent gains in the palm oil market have been driven primarily by stronger export data from neighboring Malaysia.
“There are growing concerns among market participants regarding domestic stock levels following the implementation of B50. Nevertheless, this week’s CPO price appreciation has been largely supported by Malaysia’s export performance,” said Andrial Saputra, Head of Exchange and Business Development at KPBN.
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Malaysia’s export momentum has remained robust, with three independent cargo surveyors reporting significant increases in palm oil shipments during the first 20 days of the month.
Intertek Testing Services (ITS) reported export growth of 19.11%, while AmSpec Agri Malaysia recorded a 24.95% increase. Meanwhile, Societe Generale de Surveillance (SGS) reported an even sharper rise of 78.53% compared with the corresponding period of the previous month.
KPBN considers these figures the principal catalyst sustaining bullish sentiment across the regional palm oil market.
B50 Expected to Lift Domestic CPO Consumption
On the domestic front, the nationwide rollout of the B50 biodiesel mandate is expected to reshape Indonesia’s palm oil demand structure.
Based on estimates from the Indonesian Palm Oil Association (GAPKI), full implementation of the policy could increase annual CPO demand by approximately 1.5 million to 1.74 million tonnes.
Also Read: Indonesia Cuts July 2026 CPO Reference Price to USD 1,000.90 per Ton Amid Weak Global Demand
As a result, CPO consumption by the energy sector is projected to rise to between 16 million and 19 million tonnes per year, significantly increasing the share of palm oil allocated to biodiesel production.
KPBN believes the additional biodiesel demand will inevitably reduce the volume of CPO available for export. Nevertheless, the company emphasized that the government remains committed to ensuring sufficient supplies for domestic food requirements, particularly cooking oil.
“Cooking oil availability will remain secure because the government continues to prioritize domestic consumption,” the company stated.
Also Read: Indonesia’s Palm Oil Exports Surge in April as Demand Reduces Stocks
Downstream Industry Preparing for Tighter Supply
Although Indonesia’s latest CPO inventory has increased to approximately 2.506 million tonnes, up from 2.026 million tonnes previously, KPBN expects this surplus to be temporary.
The inventory build-up resulted from weaker export activity and softer domestic consumption during previous months.
However, as the second half of 2026 progresses, downstream industries are expected to face tighter raw material availability as monthly production begins to slow while the B50 mandate increases domestic demand.
Under these conditions, export allocations are likely to be the first segment adjusted as producers prioritize domestic obligations.
Market Participants Await DSI’s Expanded Role
KPBN also noted that the establishment of PT Daya Sawit Indonesia (DSI), created to strengthen Indonesia’s palm oil trading system, has yet to produce a significant impact on the physical CPO market.
According to the company, many market participants continue to adopt a cautious “wait-and-see” approach while monitoring how DSI’s policies will be implemented.
This uncertainty temporarily affected market activity following DSI’s launch in May, when KPBN’s CPO tenders experienced nearly six consecutive days of withdrawals due to weak buying interest.
Nevertheless, KPBN believes DSI remains in the early stages of implementation and has not fundamentally altered market dynamics. Its broader influence is expected to become more visible ahead of the policy’s full implementation on January 1, 2027.
External Factors Remain the Primary Price Driver
Looking ahead, KPBN expects international market developments to remain the dominant influence on CPO prices over the coming week.
In addition to Malaysia’s strong export performance, palm oil prices continue to receive support from gains across major vegetable oil futures markets, including the Chicago Board of Trade (CBOT) and China’s Dalian Commodity Exchange (DCE), reinforcing bullish sentiment throughout the global edible oils market.
Also Read: Malaysian Palm Oil Futures Fall 1% as Weaker Vegetable Oil Market Weighs on Prices
However, KPBN cautioned that short-term price corrections remain possible if Malaysian production rebounds, as indicated by data from the Southern Peninsular Palm Oil Millers’ Association (SPPOMA), or if investors engage in profit-taking following several weeks of sustained price gains.
Even so, with Malaysian exports remaining firm, Indonesia’s B50 biodiesel mandate beginning to take effect, and supportive global commodity markets, KPBN expects domestic CPO prices to maintain their positive momentum, although short-term volatility is likely to persist. (P2)
