Middle East conflict may spur demand for palm oil in biodiesel sector

Industry officials have told?that the Middle East conflict, which has pushed up crude oil prices, could boost demand for palm oils in the biodiesel industry and for food use. Asian buyers are looking for quick shipments. Indonesian and Malaysian production reached a new record in 2025. This resulted in a rise of stocks and pressure on prices. The conflict has made palm oil more attractive to biodiesel producers, and prices have risen to their highest levels in over a year.

Anilkumar bagani, the research head at Mumbai-based Sunvin Group, said that palm oil was now trading at a'sharp discount' to gasoil. The current spread is lucrative enough to boost?demand from the biodiesel sector. The oil prices rose by more than 25% on Monday, reaching their highest level since mid-2022. This was due to the fact that some major producers reduced supplies and there were fears about prolonged shipping disruptions. Indonesia, which is the largest consumer of palm-oil-based biodiesel in the world, has said that it might revive plans to launch a B50-grade of palm-oil-based biodiesel by mid-year, to combat surging crude oil costs.

Jakarta, citing funding and technical challenges, shelved its plan to produce B50 - an equal blend between palm oil biodiesel, and conventional diesel - in January and instead continued with B40.

Bagani said that a long-term shift in policy from countries such as Indonesia would only be possible if palmoil traded at a discount to gasoline for an extended period.

Palm oil is used in everything from cakes to frying fats, cosmetics, and cleaning products. It accounts for more than half the global vegetable oil shipment and is particularly popular with consumers, especially those living in emerging markets. India leads this group.

Southeast Asia is in a good position to supply palm oil consistently to buyers in Asia, the Middle East and Europe. Carl Bek-Nielsen said, Vice Chairman and Chief Executive Director at United Plantations Berhad.

A New Delhi-based trader with a global trading house said that while palm oil is still plentiful and can be delivered quickly to Asian buyers, it's now more expensive than soyoil. This could limit the gains in demand. (Reporting and editing by Saad sayeed, Ashley Tang and Rajendra Jadhav)

(source: Reuters)