Due to a new wave of political tension, the price of oil is rising, which will support the prices of vegetable oils

The intentions of the Russian Federation to deploy tactical nuclear weapons in Belarus increase geopolitical risks, which leads to an increase in the prices of oil and other raw materials.

Oil quotations support the decision of the Russian Federation to reduce production by 500,000 barrels per day. And the statement of the US authorities about the possible extension of the credit line to support regional banks reduced traders’ fears about the continuation of the banking crisis.

May futures for Brent oil on the London ICE exchange yesterday rose by 4% to $78.1/barrel, and for WTI oil on the New York Mercantile Exchange – by 4.9% to $72.7/barrel.

The increase in the price of oil supported Friday’s increase in the prices of agricultural products, in particular the prices of vegetable oils.

May futures for soybean oil, which fell to a 1.5-year low last week, rose 2.3% to $1,200/t yesterday (+4.5% for two days, -10% for the month).

May palm oil futures on Bursa Malaysia rose 1.8% to 3,576 ringgit/t, or $809.5/t, yesterday, although they fell to a 6-month low of 3,512 ringgit/t on Friday.

According to surveyors, in the period March 1-25, compared to the same period in February, Malaysia increased the export of palm oil by 11.4-19.8%, which indicates the activation of demand.

On the Chinese stock exchange in Dalian, soybean oil futures rose by 1.2% and palm oil futures by 2% yesterday.

The market is awaiting updated data on exports from Indonesia for February, where according to the local association of palm oil producers (GAPKI), its exports in January increased by 7% compared to December to 2.95 million tons (35.2% more than in January 2022), production decreased by 11% to 4.26 million tons (+1% y/y), and stocks decreased by 13% to 3.09 million t (-34% y/y). According to surveyors, against the background of tightening export restrictions, Indonesia will reduce palm oil exports to 1.997 million tons in February.

A reduction in the supply of cheap palm oil will support soybean and sunflower oil prices, which have fallen recently. It will also help curb sales by drought-hit Argentine farmers and Ukrainian producers with low inventories due to a poor harvest.

Tags: soybean oil, prices, palm oil