Palm oil rises on Wednesday amid supply squeeze risks and stronger biodiesel demand

Malaysian palm oil futures closed higher on Wednesday as traders weighed the risk of tighter supplies caused by a potential El Niño weather event and stronger domestic demand in Indonesia following the implementation of the B50 biodiesel mandate.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange gained 11 ringgit, or 0.24%, to close at 4,621 ringgit ($1,131.77) per ton. According to Sunvin Group’s Head of Commodity Research Anilkumar Bagani, expectations of tighter supplies linked to higher palm oil consumption for biodiesel production in Indonesia continued to support the market.

Indonesia’s Energy Minister Bahlil Lahadalia said the country’s move from the B40 to the B50 biodiesel mandate is expected to increase crude palm oil consumption to 16.3–17 mln tons annually from the current 15.2 mln tons. The policy could significantly reduce export availability from the world’s largest palm oil producer.

Meanwhile, other vegetable oil markets weakened. The most active soyoil contract on China’s Dalian Commodity Exchange fell 1.4%, while the exchange’s palm oil contract declined 0.37%. CBOT soyoil futures also eased 0.25%. Despite this, palm oil continues to trade at a discount to competing vegetable oils, helping sustain global demand.

India is also expected to support the market, with edible oil imports projected to increase between July and October as slower soybean and rapeseed crushing reduces domestic supplies ahead of the country’s peak festive demand season.

Market sentiment was further supported by crude oil prices, which climbed to near six-week highs amid concerns over potential supply disruptions in the Middle East. Higher energy prices improve the competitiveness of palm oil as a biodiesel feedstock. At the same time, the Malaysian Palm Oil Council forecasts crude palm oil prices to trade between 4,400 and 4,650 ringgit per ton in August.