Indonesia’s expanding use of palm oil for biodiesel is expected to provide support to crude palm oil (CPO) prices in 2026, with the commodity projected to trade between $959 and $1,172 per tonne under different market scenarios, UkrAgroConsult reported.
The outlook presents three possible price scenarios for next year at $959, $1,066 and $1,172 per tonne. This compares with an average CPO price of $942 per tonne in 2024 and a projected average of $1,017 per tonne for 2025.
A key factor expected to provide support to prices is Indonesia’s B40 biodiesel programme, which mandates a 40% biodiesel component in the fuel blend. Greater use of palm oil for biodiesel production is increasing domestic demand and could limit the quantity of feedstock available for other applications and exports.
Palm oil consumption for biodiesel production in Indonesia rose by an average of 12.2% annually between 2020 and 2024. By 2025, the country’s installed biodiesel production capacity had reached 19.15 million kilolitres, with 26 production facilities in operation.
Despite rising use of palm oil for biodiesel, domestic consumption and exports continue to account for substantial volumes.
During January-July 2025, Indonesia’s domestic palm oil consumption reached 14.3 million tonnes, an increase of 6.57%. Exports during the same period rose 11.1% to 19.2 million tonnes.
The outlook for CPO prices will depend on several factors beyond the implementation of the B40 programme.
Production levels of competing vegetable oils, demand from major importing countries and changes in their trade policies could influence market conditions. The price relationship between crude oil and vegetable oils will also remain important, particularly for the economics of biodiesel.
Other factors include the level of government support for biodiesel production and trends in Indonesia’s palm oil output.
The combination of stronger domestic biodiesel demand and developments in global vegetable oil markets will therefore play a key role in determining Indonesia’s CPO price trajectory in 2026.
