Palm Oil Surges to Two-Year High on Firm Exports and Crude Rally

Palm oil prices have surged to a two-year high, driven by robust exports and a rally in crude oil prices. The world's most widely used cooking oil has seen a significant increase in demand from key importers like India, China, and the European Union (EU), contributing to the price surge. This article explores the factors behind the recent price surge and its implications for the palm oil market.

The palm oil market has witnessed a significant boost in demand from major importers. In October 2024, shipments from Malaysia, the second-largest producer, climbed 11% month-on-month, driven by stronger exports to India, China, and the EU (Source: Intertek Testing Services). This increase in demand, coupled with a rally in crude oil prices, has contributed to the surge in palm oil prices.

Crude oil prices play a significant role in driving palm oil's appeal as a biofuel feedstock. As crude oil prices rise, palm oil becomes more attractive as a biofuel alternative due to its lower cost. This dynamic is evident from the recent surge in palm oil prices, which tracked gains in crude oil prices. Indonesia's plan to increase the volume of tropical oil used in its biofuel mix early next year is expected to further boost demand for palm oil, as higher crude oil prices make biofuels more competitive.

Government policies, such as biofuel mandates and export duties, also play a crucial role in palm oil's price volatility and demand as a biofuel. Indonesia's decision to increase its palm-based biodiesel blend to 40% (B40) in January 2024 will boost demand, driving prices higher. Additionally, Malaysia's revision of export duties has influenced supply and prices. These policies highlight the crucial role of government interventions in shaping the palm oil market.

Supply and demand dynamics in the global vegetable oil market significantly influence palm oil's price and its appeal as a biofuel. The palm oil market is driven by robust demand from key buyers like India, China, and the EU, with exports from major producers like Malaysia and Indonesia surging. Meanwhile, supply constraints, such as labor shortages in Malaysia and Indonesia's export ban in 2022, have contributed to price increases. The global vegetable oil production growth is expected to accelerate to 4% in 2023, driven by rapeseed and soybean oils, which may alleviate some supply pressures.


The increased demand for palm oil in biofuels, particularly in Indonesia's B40 biodiesel blend, boosts its appeal as a renewable energy source. However, the environmental implications are significant. Palm oil development has led to substantial forest loss and land-use changes, contributing to climate change. To mitigate these impacts, governments and private sector actors must promote voluntary sustainability standards, such as the Roundtable on Sustainable Palm Oil, to reduce deforestation and encourage more sustainable practices.

In conclusion, the recent surge in palm oil prices, driven by firm exports and a crude oil rally, presents both opportunities and challenges. The increased demand for palm oil in biofuels boosts its appeal as a renewable energy source, but the environmental implications require careful consideration. As the palm oil market continues to evolve, investors should monitor the interplay between supply and demand dynamics, government policies, and environmental concerns to identify undervalued opportunities with strong growth potential and solid fundamentals.