Palm oil climbs to a near one-month high as US-Iran conflict lifts crude oil prices

Palm oil prices on Bursa Malaysia climbed to their highest level in nearly a month, supported by a sharp rise in crude oil and vegetable oil markets. The rally was triggered by the escalating military conflict between the United States and Iran, which has heightened concerns over global energy supplies and increased the geopolitical risk premium.

Palm oil futures in Kuala Lumpur rose to RM4,635-4,653 per tonne, the highest level since June 23. According to analysts at Fast Markets Palm Oil Analytics, stronger Brent crude prices, together with gains in soybean oil and palm oil futures on the Chicago and Dalian exchanges, provided additional support to the market.

Expectations of stronger Malaysian palm oil exports during the first half of July also contributed to the bullish sentiment. Market participants are awaiting cargo survey data that could confirm rising export volumes and provide further support for prices in the coming weeks.

However, further upside may be limited by relatively high palm oil inventories in Indonesia and Malaysia, the world’s two largest producers. Analysts at Sunvin Group believe these ample stockpiles could cap additional price gains despite elevated geopolitical risks.

The global vegetable oil market also continues to show an unusually wide price gap between soybean oil and palm oil. Soybean oil is trading at a premium of around $465 per tonne over palm oil, almost double the average seen over the past year. At the same time, palm oil is trading at a discount to gasoil, strengthening its competitiveness as a feedstock for biodiesel production.

Market direction in the coming weeks will largely depend on developments in the Middle East, crude oil prices and the pace of Malaysian exports. If geopolitical tensions continue to escalate, the war risk premium is likely to keep supporting vegetable oil prices despite comfortable global palm oil supplies.

Tags: prices, palm oil