Seasonal increase in palm oil production and low crude oil prices put pressure on vegetable oil markets

The trade war between the US and China is slowing the development of the world’s largest economies and driving down the prices of oil and commodities.

June Brent crude futures fell to a 4-year low in early April and are trading at $64.5/barrel (+2.4% for the week, -9.3% for the month).

Low oil prices are putting heavy pressure on palm oil prices, which are mainly used to produce biodiesel.

June CPO palm oil futures on the Bursa Malaysia exchange have fallen 10% since the beginning of April to 4,107 ringgit/t or $931/t (-2% for the week) amid increased production and slowing exports. According to the Malaysian Palm Oil Board (MPOB), Malaysia increased its crude palm oil (CPO) production by 16.76% in March compared to February, while exports increased by only 1%. During April 1-15, palm oil exports increased by 13.55% compared to the corresponding period in March to 450.7 thousand tons, – reports surveyor AmSpec Agri Malaysia.

May soybean oil futures on the Chicago Board of Trade rose 5.3% to $1,044/t during the week, almost recovering a 7.8% drop in early April (+12.5% month-on-month), as traders expect increased subsidies for biodiesel production in the US.

According to Trading Economics, prices for sunflower oil delivered to buyers have fallen by 2% to $1,318/t since the beginning of April (-2% per month), as buyers prefer cheaper oils.

In Ukraine, the demand prices for sunflower oil with delivery to Black Sea ports remain at the level of 1125-1135 $/t, while prices with delivery to Greece or Bulgaria have decreased from 1100-1110 €/t to 1070-1080 €/t or 1200-1220 $/t due to the strengthening of the euro against the dollar, so sellers are more active in selling oil at the port.

According to ASAP Agri, during April 1-9, Ukraine increased its sunflower oil exports by 10% to 151,000 tons compared to the corresponding period in March, due to increased demand after Ramadan and increased sunflower sales. Traders expect increased demand from India in the near future.

During March, oil stocks in India fell by 11.3% to 1.67 million tonnes, the lowest level since December 2021, SEA reported. This was due to a decrease in palm oil imports over the past 4 months. In March, sunflower oil imports fell by 16% to a 6-month low of 190.7 thousand tonnes, soybean oil increased by 25% to 355.4 thousand tonnes, and palm oil by 14% to 424.6 thousand tonnes, but the volume of purchases remained below the average. Compared to last year, the share of palm oil in India’s total oil imports fell from 61% to 43%, while soybean and sunflower oil increased to 57%.

Analysts believe that, amid declining inventories, India will increase imports of oils in April, especially given the start of the holiday season.

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