InfoSAWIT, JAKARTA – Indonesia’s crude palm oil (CPO) market is entering the second half of 2026 with a combination of strengthening domestic and external market drivers. While the upcoming implementation of the B50 biodiesel mandate is expected to increase domestic palm oil consumption, PT Kharisma Pemasaran Bersama Nusantara (KPBN) believes short-term price movements will continue to be dictated primarily by developments in Malaysia’s export market.

According to KPBN, the nationwide rollout of B50 in July has begun shaping market expectations that stronger biodiesel demand will gradually tighten Indonesia’s domestic CPO supply. That prospect has provided additional support to palm oil prices in recent trading sessions.

Nevertheless, international market fundamentals remain the dominant price catalyst, particularly the robust performance of Malaysian palm oil exports.

“There are concerns among market participants regarding domestic stock levels following the implementation of B50. However, the recent rally in CPO prices has been driven mainly by Malaysia’s strong export data,” Andrial Saputra, Head of Exchange and Business Development at KPBN, told InfoSAWIT on Tuesday.

Three Malaysian cargo surveyors have reported substantial export growth during the first 20 days of the month. Intertek Testing Services (ITS) estimated exports increased 19.11%, while AmSpec Agri Malaysia reported a 24.95% rise. Societe Generale de Surveillance (SGS) recorded an even stronger jump of 78.53% compared with the corresponding period of the previous month.

KPBN considers these figures to be the primary catalyst underpinning bullish sentiment across the regional palm oil market.

B50 Expected to Increase Domestic CPO Demand by Up to 1.74 Million Tonnes

On the domestic front, the B50 biodiesel programme is expected to significantly reshape Indonesia’s palm oil demand structure.

Based on estimates from the Indonesian Palm Oil Association (GAPKI), full implementation of the programme could raise annual CPO demand by between 1.5 million and 1.74 million tonnes, lifting total palm oil consumption for the energy sector to approximately 16–19 million tonnes per year.

KPBN believes the higher biodiesel allocation will inevitably reduce the volume of CPO available for export. However, the government is expected to continue prioritising domestic food security, particularly cooking oil supplies.

“The availability of cooking oil will remain secure because the government continues to prioritise domestic demand,” the company said.

Downstream Industry Preparing for Tighter Feedstock Supply

From the supply perspective, KPBN noted that Indonesia’s latest CPO inventory stood at around 2.506 million tonnes, up from 2.026 million tonnes previously. The increase reflected weaker exports and softer domestic consumption during the earlier period.

However, KPBN expects the higher stock level to be temporary.

As Indonesia enters the second half of 2026, downstream industries are likely to face tighter feedstock availability as monthly production begins to moderate while B50 implementation gathers pace.

The company expects export markets to become the first segment affected by any future supply adjustments.

Market Still Awaiting DSI’s Role

KPBN also noted that the establishment of PT Daya Sawit Indonesia (DSI) has yet to significantly alter the country’s physical CPO trading mechanism.

According to the company, most market participants remain in a wait-and-see mode while assessing DSI’s future policy direction.

That cautious sentiment briefly affected trading activity following DSI’s launch in May, when KPBN’s CPO tenders experienced nearly six consecutive days of withdrawals due to subdued buying interest.

Despite the temporary disruption, KPBN believes DSI remains in its early supervisory phase and has not fundamentally changed market dynamics. Its broader influence is expected to become more evident ahead of the policy’s full implementation on January 1, 2027.

Global Factors Continue to Dominate

Looking ahead, KPBN expects external developments to remain the principal driver of CPO prices over the coming week.

In addition to strong Malaysian export performance, supportive movements in the Chicago Board of Trade (CBOT) and Dalian Commodity Exchange have reinforced positive sentiment across global vegetable oil markets.

Nevertheless, KPBN cautioned that short-term price corrections remain possible should Malaysian production recover, as indicated by SPPOMA production data, or if investors engage in profit-taking following the recent price rally.

Overall, the company believes that the combination of resilient export demand, the commencement of Indonesia’s B50 mandate, and favourable global vegetable oil market conditions should allow domestic CPO prices to maintain a positive trajectory, although market volatility is expected to persist in the near term. (T2)