Palm Oil's Golden Moment: Why to Bet Now on Resilient Prices Amid OPEC+ Chaos

The oil markets are in a tizzy. OPEC+ just announced another round of production hikes, sending crude prices spiraling toward $60 a barrel. But here’s the twist: palm oil isn’t sweating it. In fact, this is the best time to pile into palm oil stocks. Why? Because structural demand shifts—driven by biodiesel mandates—are creating a floor under prices, while OPEC+’s chaos is a paper tiger. Let me break it down.

Why OPEC+ Can’t Sink Palm Oil

OPEC+ is flooding the market with crude, right? Yes—but here’s what they’re missing: palm oil isn’t just a commodity; it’s a geopolitical weapon. Indonesia’s B40 mandate (40% palm oil in biodiesel by 2025) is a game-changer. This policy alone will suck 1.2 million metric tons of palm oil out of global exports and into domestic biodiesel production. That’s not a typo—this is a massive demand boost that OPEC+ can’t offset.

Even if crude prices drop further, Indonesia’s policy ensures palm oil demand stays locked in. The math is simple: B40 isn’t optional—it’s the law. Producers must comply, no matter the cost. And the government is backstopping it with higher export levies (now 10%) to fund subsidies for biodiesel makers. This isn’t just a subsidy—it’s a guarantee that palm oil prices won’t collapse, even if crude does.

The POGO Spread: Palm Oil’s Secret Weapon

You’ve heard of the POGO spread—the difference between palm oil and gasoil prices. Right now, it’s $165/mt, meaning palm oil is more expensive than gasoil. That should hurt biodiesel demand… but here’s the catch: Indonesia’s policies are forcing demand regardless of the spread.

Analysts at Oil World say a $165 spread would usually slash global biodiesel production by 500,000 mt annually. But B40 isn’t optional—it’s required. So even if biodiesel is less profitable, Indonesia’s refineries will still run at full capacity. This creates a price floor for palm oil.

Supply Constraints? More Like Price Support

Palm oil production isn’t just flat—it’s struggling to grow. Why?
- Weather chaos: La Niña flooding in Malaysia is wrecking harvests.
- Aging plantations: 30% of Indonesia’s trees are past peak yield.
- Labor shortages: Migrant worker bans are leaving fields untended.

The result? Global palm oil output will grow just 2.3% in 2025, even as demand surges. Supply can’t keep up with B40’s thirst—and that’s bullish.

The Geopolitical Play: Europe and the U.S. Are Our Allies

The EU’s delayed deforestation rules (pushed to 2026) are a gift. It means palm oil producers with RSPO certification can keep selling into Europe without legal hurdles. Meanwhile, U.S. tariffs on Indonesian palm oil? They’re a blessing in disguise.

Those 32% tariffs are pushing buyers to soybean oil—but soy’s $12/bbl cheaper than palm oil, creating a price ceiling. The U.S. can’t kill palm oil demand; they’re just redirecting it to China and India. And guess what? India’s palm oil imports are up 6% this year—thanks to B40’s export diversion.

The Bottom Line: Buy Palm Oil Now

The bears are screaming about OPEC+ and crude’s collapse—but they’re missing the big picture. B40 isn’t just a policy; it’s a demand floor. The POGO spread is a red herring—the subsidy-funded mandates are here to stay.

Here’s your action plan:
- Go long on palm oil futures (CPO). Target prices hit RM4,600/mt by year-end (vs. RM4,200 last year).
- Buy stocks tied to production: Wilmar International (SGX: W01) and IOI Corp (KLSE: 1919) are leveraged to rising prices.
- Hedge against crude with biodiesel ETFs like PBF Energy (PBF).

This isn’t a bet on oil—it’s a bet on policy-driven scarcity. OPEC+ can flood the crude market, but they can’t stop Indonesia from burning palm oil. Act now before the B40 rally lifts prices off the floor.

As the saying goes: “When in doubt, bet on the mandate—and the math.”

Disclosure: This article is for informational purposes only. Consult a financial advisor before investing.