The vegetable oil market is caught between high oil prices and rising supply

A sharp rise in crude oil prices and reduced sunflower oil supplies from the Black Sea region are supporting global vegetable oil prices. October Brent futures have gained 12.7% over the past week to $89 per barrel, improving the outlook for biofuel feedstock demand. At the same time, the market expects a seasonal increase in rapeseed and sunflower oil supplies from Ukraine and Russia, which could limit further price gains.

The decline in Black Sea supplies is providing particularly strong support to sunflower oil prices in India. Bid prices rose by another $15/t over the week to $1,485–1,490/t CIF Mumbai. In Ukraine, sunflower oil for August delivery to Danube ports is quoted at $1,320–1,335/t, although supply remains minimal as most plants have halted sunflower seed crushing. Meanwhile, Russian sunflower oil for September delivery fell by $50–60/t to $1,310–1,320/t FOB amid expectations of new-crop supplies and higher freight costs.

Ukrainian crushers are increasingly switching to rapeseed, with low domestic prices providing attractive crushing margins. Higher production is already putting pressure on rapeseed oil prices, which have declined to €1,000–1,020/t FCA plant and €1,040–1,050/t loaded into European-gauge railcars at Ukraine’s western border. Prices delivered to Germany remain at €1,170–1,200/t, while road transportation costs for vegetable oil from Ukraine to the EU have risen from around €100/t to €170–200/t within several weeks.

Price trends in other vegetable oil markets remain mixed. December soybean oil futures in Chicago gained 0.9% over the week to $1,500/t, although they remain 4.3% lower over the past month amid improved weather and expectations of a larger US soybean crop. Malaysian palm oil rose 1.1% over seven days to 4,748 ringgit/t ($1,160/t), supported by stronger Indian imports, while further growth in Malaysian production and stocks continues to limit price gains.

Pressure on the global vegetable oil market could intensify in September-October. Seasonal supplies of cheaper sunflower and rapeseed oil from the Black Sea region are expected to increase, while the US is set to boost soybean oil availability and Canada will add more rapeseed oil to the market. Combined, these factors could outweigh support from high crude oil prices and limit prices across the major vegetable oil markets.

Tags: Ukraine, EU, prices, USA, oilseed market