KUALA LUMPUR : Palm oil futures surged past the RM4,000 threshold, driven by a rally in soybean oil and crude oil prices, following a significant policy proposal from the United States aimed at boosting biofuel blending mandates.
The US Environmental Protection Agency (EPA) on Friday unveiled a long-anticipated proposal that would require American refiners to blend a record 24.02 billion gallons of biofuels into conventional petrol and diesel in 2026. This figure represents a near 8% increase over the 2025 target and exceeded most market expectations. The proposed mandate is part of broader efforts to stimulate domestic biofuel production while reducing dependency on imports.
The news sent soybean oil prices in Chicago soaring more than 6% on Friday, with gains extending into Monday trading. This marked the strongest two-day performance for the commodity in nearly three years. Palm oil followed suit, with futures in Kuala Lumpur climbing as much as 4.1%, mirroring the bullish sentiment in edible oils.
Analysts from CIMB Securities, Ivy Ng and Lim Yue Jia, highlighted in a client note that the EPA’s proposal is “supportive of edible oil demand and crude palm oil prices, as the biodiesel mandate will help sustain US consumption of edible oils”.
Further fuelling palm oil’s rally is the surge in global crude oil prices, triggered by escalating tensions in the Middle East. Brent crude, the international benchmark, extended Friday’s 7% surge as investors priced in potential supply disruptions from a region responsible for approximately one-third of the world’s crude output.
Darren Lim, commodities strategist at Phillip Nova Pte Ltd, noted that any further escalation could significantly impact energy supply chains. “A potential escalation could disrupt oil supplies, pushing energy prices higher and increasing both the cost of palm oil production and demand for biofuels,” he stated. “Biofuels become more competitive when crude prices rise, often prompting shifts in demand away from petroleum-based fuels,” he added.
With rising geopolitical risks and strong policy tailwinds in the US, palm oil markets are likely to remain volatile yet supported in the near term.
-Bloomberg
