Physical palm oil prices in Indonesia rose to a 10-month high on March 15 at $986/mt as a seasonally low production season in Southeast Asia coincided with a sudden spurt in demand from India trying to cover for sunflower oil shipments delayed by the Red Sea shipping crisis, traders told S&P Global Commodity Insights.
India, the largest buyer of vegetable oils in the world, had upped its purchase of sunflower oil from Russia and Ukraine while cutting back its palm oil imports in recent months, according to trade data, as import prices of sunflower oil dipped below that of palm oil and soybean oil in February.
For the month of February, the average crude palm oil price on a CIF basis to an Indian port was at $933/mt compared with crude sunflower oil at $920/mt and crude soybean oil at $924/mt, data from Indian trade body the Solvents' Extractors Association showed March 13.
The three vegetable oils compete for a share in the global vegetable oils market and their prices tend move in tandem with each other.
The price of crude palm oil FOB Indonesia has risen almost 20% since the start of the year, according to S&P Global data.
In Indonesia and Malaysia, which account for about 85% of the world's palm oil supply, crude palm oil premiums have increased, with palm oil refiners consequently also facing negative margins, an analyst said March 14.
Markets at year-high
The benchmark third-month palm oil futures on the Bursa Malaysia commodity exchange rose 4.5% on the week to MR4,286/mt ($911.04/mt) on March 15, its highest level since March 3, 2023.
Weather concerns and strong demand are the two main catalysts behind the recent rally in Malaysian palm oil futures, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.
"Palm oil refineries [in Malaysia] still need to buy crude palm oil to process despite high prices, and until we sight a significant recovery in production, prices will continue to remain resilient," Supramaniam said.
On the supply side, exports of Malaysian palm oil products for March 1-15 rose 8.4% to 542,973 mt from 500,889 mt shipped over February 1-15, independent inspection company AmSpec Agri said March 15.
The seasonal squeeze on production, along with Indian demand as buyers cover for shortages caused by delays to shipments through the Red Sea, have brought on the recent rally, a trader told S&P Global.