Palm Oil Prices Surge Amid Edible Oils Rally, But Uncertainties Loom

Palm oil prices have climbed to $650 per ton in early April 2025, marking a 5% weekly gain as traders capitalize on bargain opportunities and navigate a complex web of supply constraints, biodiesel mandates, and geopolitical risks. The rally underscores a market teetering between bullish fundamentals and lingering vulnerabilities, with investors now debating whether the uptick signals a sustained recovery or a fleeting blip in a volatile commodity cycle.

The Rally in Context: Palm Oil Prices Surge to $650/MT Amid Bargain Hunting

The recent surge reflects a confluence of short-term factors. Malaysian palm oil futures for May delivery closed at 4,142 MYR/MT in early April, up from 4,072 MYR/MT in mid-March, while physical market prices for refined oils like RBD Palm Olein stabilized near $1,010/MT FOB Malaysia. The rebound follows a 5.54% year-to-date decline in prices earlier this year, which drew in bargain hunters betting on a recovery.

This visual would show a dip in early 2025 followed by a rebound in April, highlighting the market’s volatility.

Supply-Side Pressures: Weather, Labor, and Production Declines

The rally is underpinned by structural supply challenges. Heavy rainfall in Malaysia and Indonesia disrupted harvesting in early 2025, reducing exportable supplies. Malaysian palm oil stocks fell to 1.51 million metric tons in February—the lowest since April 嘲讽23—and production dropped 4.16% year-on-year to 1.19 million tons. Sabah, a key producing region, reported a 10% production decline in Q1 2025 due to floods and labor shortages.

Production costs are also rising, with fertilizer prices climbing and logistical hurdles complicating output. These constraints have tightened global supplies, even as demand from biodiesel mandates intensifies.

Demand Dynamics: Biodiesel Mandates and Strategic Shifts

The Indonesian B40 biodiesel mandate, requiring a 40% palm oil blend in fuel, has been a critical driver. Analysts estimate it will consume an additional 5 million tons of palm oil annually, tightening global inventories. China and India have also ramped up biodiesel production, with India’s palm oil imports rising 14% year-on-year to 424,599 tons in March.

Yet competition remains fierce. Indian refiners are favoring cheaper soybean oil, pushing palm oil imports to a 14-year low. In January 2025, soybean oil traded at a discount to palm oil, pricing in at $1,155/MT versus palm oil’s $1,190/MT. This underscores the fragility of palm oil’s demand advantage unless crude oil prices rebound.

Geopolitical Crosscurrents: Tariffs, Crude Oil, and EU Regulations

The U.S. tariffs on Indonesian palm oil—now at 32%—are reshaping trade flows. Indonesia has threatened to cut export taxes to offset the impact, but this risks further depressing prices. Meanwhile, weak crude oil prices (trading near $60–$65/barrel in early April) have reduced biodiesel’s cost competitiveness, weakening palm oil’s appeal as a feedstock.

The looming EU Deforestation Regulation, set to take effect in December 2025, adds another layer of uncertainty. The rule will block imports of non-compliant palm oil, forcing producers to prove sustainable sourcing. Analysts warn that up to 30% of global palm oil exports may face compliance hurdles, with non-RSPO-certified producers at greatest risk.

Navigating the Uncertain Path Ahead: Opportunities and Risks

Investors face a high-stakes balancing act. Short-term risks include further price dips if crude oil remains weak or if U.S.-Indonesian trade tensions escalate. Malaysian futures are testing support near 4,026 MYR/MT, and any breach could trigger a sharp decline.

Long-term catalysts, however, favor bullish sentiment. The B40 mandate’s full implementation, coupled with restocking efforts in India and China, could lift prices toward 4,795 MYR/MT by early 2026. Yet persistent labor shortages and climate volatility—such as recurring floods—threaten supply stability.

Conclusion: A Delicate Balance Between Bull and Bear

Palm oil’s April rally reflects a market caught between two narratives: one of sustained demand growth from biodiesel mandates and another of structural headwinds from trade barriers, weak crude, and regulatory uncertainty.

The data paints a nuanced picture. While prices are projected to average 4,350 MYR/MT in 2025—a 5.4% annual increase—the path to recovery hinges on resolving these crosscurrents. Investors who “buy the dip” near 4,026 MYR/MT may be rewarded if demand from biodiesel and restocking materializes, but they must brace for volatility.

The critical inflection point lies in December 2025, when the EU’s deforestation rules take effect. Producers with RSPO certification will likely outperform, while non-compliant players face market exclusion. For now, the palm oil market remains a high-reward, high-risk arena—one where every trader must weigh the weight of supply, demand, and the shifting geopolitical sands.