Vegetable oil prices barely responded to crude oil price hikes

The breakdown of negotiations between the US and Iran late last week led to another 13% increase in crude oil quotes, but vegetable oil prices remained almost unchanged for the week, remaining at their highest levels since 2022.

June Brent crude futures rose 13% to $111/barrel in the week (+2.8% in the month, +59% since the start of the war). Iran and the US continue to agree on terms for the start of negotiations, but the US is currently blocking supplies to/from Iran, worsening the economic situation inside Iran, which will soon force the ayatollah regime to negotiate and lead to a drop in crude oil prices.

May soybean oil futures on the Chicago SWOT increased by 0.4% for the week (after a sharp increase of 8.4% the week before last) against the backdrop of a new jump in oil prices (+18% since the start of the war).

During the week, soybean oil prices in China rose by $10/t to $1,250/t, for May deliveries in Brazil by $20-30/t to $1,190-1,200/t FOB, and in Argentina by $1,140/t. Brazilian and Argentine soybean oil is offered at an incredible discount of almost $350/t compared to US soybean oil prices in Chicago, so prices on the physical market remain relatively stable.

June palm oil futures on Bursa Malaysia fell 0.5% to RM4,536/t or $1,149/t during the week (+1.4% in two weeks). Palm oil quotes initially rose in line with oil prices, but are now trading back at their end-February (pre-war) levels, having failed to respond to the 59% rise in oil prices. After a pick-up in Malaysian palm oil exports in March, they fell 16-16.8% in April (according to local surveyors). Physical markets are well supplied, so prices have remained stable for the time being.

It should be noted that the seasonal increase in the supply of cheap sunflower oil from Argentina is depressing prices in India, and during the week the prices of sunflower oil for delivery to India fell by another $10/t to $1410-1415/t CIF Mumbai. Against this background, the supply prices of Russian sunflower oil decreased by $10/t to $1315-1320/t FOB, supported by a sharp decrease in domestic duty.

Demand prices for Ukrainian sunflower oil increased by another $5-10/t to $1,320-1,325/t for delivery to Black Sea ports during the week amid further growth in sunflower prices, but the decline in processors’ margins and new damage to the oil terminal in Chornomorsk, which led to significant oil losses, will further reduce processors’ activity.

Markets are expecting the end of the war with Iran and the blocking of oil exports from the Middle East, but analysts warn that if the situation does not change in the near future, prices for raw materials (grains and oilseeds) will rise sharply following the prices of oil and derivatives.