Crude oil price fluctuations keep vegetable oil prices high

The war with Iran has been going on for 13 days. While the US and Israel are destroying the military potential of the ayatollah regime, Iran is causing damage to the global economy by attacking the oil and gas infrastructure of the Middle East and tankers carrying petroleum products. Iran’s main weapon remains the blockade of free shipping in the Persian Gulf, namely the Strait of Hormuz.

Following news of Iran’s mining of the Strait and damage to three tankers attempting to pass through the Strait of Hormuz yesterday, oil prices resumed their rise.

May Brent crude futures fell 13% to $87.5/barrel on Tuesday, rose 4.5% to $92/barrel on Wednesday, and reached $100/barrel this morning.

The US military said it was working on a plan to conduct convoys through the strait, but could not yet guarantee safety.

After the G-7 decided to allocate 400 million barrels of oil from reserves to support the market, Trump announced that he would also allocate 120 million barrels of oil from US reserves for the US market, which would calm prices somewhat.

Fluctuations in oil prices lead to sharp jumps in exchange prices for vegetable oils, but prices in physical markets rise very slowly.

May palm oil futures on the Bursa Malaysia exchange followed oil prices, rising 4.7% on Monday, falling 3.1% on Tuesday, and rising 1.6% on Wednesday to 4,499 ringgit/t or $1,150/t (+11% since the start of the war).

They were supported by a sharp increase in demand for palm oil, which remains the cheapest on the market. Thus, exports of palm oil products from Malaysia during March 1-10 increased by 37.9-45.3% compared to the same period in February, while in February they decreased by 22.5% compared to January to 1.13 million tons.

According to the Malaysian Palm Oil Board (MPOB), the country’s palm oil stocks fell 3.9% in February to a 4-month low of 2.7 million tonnes as crude palm oil production fell 18.6% to 1.28 million tonnes. Usually, seasonally warmer temperatures boost production and exports, so exporters will accelerate shipments.

May soybean oil futures on the Chicago SWOT rose by 7% at the beginning of the Iran war, fell by 1% on Monday and Tuesday, and yesterday rose again by 2% to $1,478/t (+15.7% for the month).

Despite the increase in the forecast for global oilseed production in the USDA report , markets remain influenced by speculative demand caused by the war.

Indian buyers have stepped up imports of vegetable oils, especially palm oil, on a fast-delivery basis amid a sharp rise in global freight rates, as they fear delays in soybean and sunflower oil supplies due to the war in the Middle East. However, processors are in no hurry to buy oil at high prices, as they expect prices to fall in the near future.

Prices for sunflower oil delivered to India increased by only $10/t to $1,420-1,425/t CIF Mumbai in the week, as they are already significantly higher than prices for soybean and palm oil. Offer prices for Russian sunflower oil increased by $10/t to $1,315-1,325/t FOB in the week, and demand prices for Ukrainian sunflower oil increased by $10/t to $1,280-1,290/t delivered to Black Sea ports.

Despite the increase in the supply of soybean oil from South America, its prices in Brazil increased by $10-20/t to $1,110-1,120/t FOB in a week, and on the Dalian exchange by $20/t to $1,220-1,235/t. Markets hope that after the end of the war with Iran, world oil prices will decrease again.

Recall that all wars in the Middle East with intensive airstrikes lasted 6, 12 days, and only the Iran-Iraq war lasted more than 10 years, but it was related to religious differences of citizens. Currently, the US, Israel and all the countries of the Strait are not interested in a long war, so on the eve of the meeting between Trump and Xi at the end of March, we should expect a ceasefire and the start of negotiations with Iran.

Tags: sunflower oil, soybean oil, prices, palm oil, edible oils