Palm oil prices moved higher ahead of the weekend as market participants increased expectations that Indonesia’s planned B50 biodiesel programme could reduce export availability and tighten global supply.
Indonesia, the world’s largest palm oil producer, has indicated that it remains on schedule to launch the B50 mandate from July 1 after fuel testing delivered positive results, according to Energy Minister Bahlil Lahadalia.
Under the B50 policy, diesel sold in the domestic market will contain 50% palm-based biodiesel. The move is expected to significantly increase domestic consumption of palm oil and reduce the volume available for exports.
Market participants are closely watching the government’s announcement on B50 allocation volumes, as these allocations are expected to determine the scale and pace of additional domestic demand.
The anticipated rise in local consumption has supported sentiment in the palm oil market, with traders expecting tighter supply conditions once the programme begins.
However, the market outlook remains influenced by movements in energy prices. Lower crude oil prices could reduce the economic attractiveness of biodiesel relative to conventional fuel and may limit the extent of further gains in palm oil prices despite policy-driven demand.
Malaysia’s benchmark September palm oil contract was trading around 4,649 ringgit per tonne, while the Malaysian Palm Oil Council expects prices to remain in the range of 4,400 to 4,650 ringgit per tonne during July.
Industry observers noted that biodiesel mandates create more stable demand because fuel suppliers are required to purchase feedstock regardless of price movements.
If Indonesia diverts a larger share of palm oil toward domestic biodiesel production, global export availability may tighten further, potentially supporting regional benchmark prices.
At the same time, traders are expected to closely monitor official allocation details, as any changes in expected domestic usage could influence short-term market movements and reshape supply expectations across international markets.
