The escalating conflict in the Middle East and the sharp rise in crude oil prices could increase demand for palm oil from the biodiesel industry. Market participants say higher energy prices and rising freight costs are prompting Asian buyers to seek quicker shipments of vegetable oils.
Crude oil prices surged by more than 25%, reaching their highest levels since mid-2022, making palm oil more attractive for biodiesel production. Analysts note that palm oil is currently trading at a significant discount to gasoil, which improves its economic competitiveness as a feedstock for alternative fuels.
Policy decisions in major producing countries could also support demand. Indonesia, the world’s largest consumer of palm oil-based biodiesel, is considering reviving plans to introduce the B50 blend — a fuel containing 50% palm oil biodiesel. Earlier this year, the government postponed the initiative due to technical and funding challenges and continued with the B40 mandate.
At the same time, global palm oil supplies remain abundant. Production in Indonesia and Malaysia reached a record level in 2025, increasing stocks and putting pressure on prices. Thanks to well-developed logistics, Southeast Asian producers can quickly ship palm oil to buyers in Asia, the Middle East, and Europe.
However, further demand growth could be limited by competition from soybean oil. Some traders note that palm oil has recently become more expensive than soyoil, which may reduce its attractiveness for importers and the biodiesel sector.
