Sharp drop in oil prices has increased pressure on vegetable oil quotes

Trump’s new tariffs shocked all US market participants and led to a 4-6% drop in stock indices. Oil prices followed suit, falling 7% on expectations of a recession or global crisis, which was expected to occur in 2020 due to the disruption of supply chains due to Covid, but strong stimulus measures by many governments helped to contain the situation.

Commodity markets are currently reacting with a slight decline in quotes, as traders monitor what tariffs on American goods other countries will impose in response, which will allow them to assess the prospects for exports from the United States. So far, vegetable oil quotes, which are correlated with oil prices, have fallen the most.

June Brent crude futures fell 7% to $70/barrel yesterday (-0.7% month-on-month), while US WTI crude fell 7.2% to $66.5/barrel (-1%) on expectations of a decline in global demand due to the global economic slowdown and disruptions to supply chains. Prices were also pressured by the announcement that OPEC+ would extend its planned output increase in May.

OPEC+ said it would increase crude oil production by 411,000 barrels per day in May, following a 138,000-barrel increase in April. OPEC+ is increasing production to offset two years of declines and gradually restore total output to 2.2 million barrels per day by 2025.

US economic news on Thursday was weaker than expected, which added pressure to oil prices.

In the second half of March, oil prices rose amid tightening secondary sanctions against Iranian oil refiners (mainly Chinese companies) and expectations of similar sanctions on Russian oil if Russia does not cease fire against Ukraine at Trump’s request.

According to Bloomberg, in March, oil exports from the Russian Federation rose to a 5-month high of 3.45 million barrels per day, which is also putting pressure on prices.

May soybean oil futures on the Chicago Board of Trade, after a speculative jump of 14.5% over the week, fell 3.2% yesterday to $1,035/t (+10% over the month) under pressure from falling oil prices. The market is awaiting decisions on whether the Trump administration will increase biodiesel production mandates in 2026, although if the crisis in the US intensifies, the Administration will be forced to cut budget spending, so the subsidies may not be as large as biodiesel producers hope.

June CPO palm oil futures on the Bursa Malaysia exchange fell 2.2% to 4,363 ringgit/t or $983/t yesterday, remaining under pressure from falling oil prices and seasonal production increases.

In Ukraine, sunflower oil prices remain at $1,125-1,135/t delivered to Black Sea ports amid supply shortages and reduced sunflower processing, but they may decline if price declines in neighboring oil markets intensify.

Tags: Ukraine, sunflower oil, prices, edible oils