Palm oil prices seen rising 12% to RM5,200 by mid-July on biodiesel demand surge: Dorab Mistry

Malaysian palm oil prices are forecast to climb approximately 12 per cent to RM5,200 (US$1,316) per metric ton by mid-July, driven by stronger biodiesel demand and tighter supplies stemming from elevated energy prices following the US-Israeli war on Iran, prominent edible oils analyst Dorab Mistry said on Wednesday, The Edge Malaysia reported.

The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange fell 1.34 per cent to RM4,647 per metric ton at the midday break on Wednesday, though the commodity has gained about 15 per cent since the conflict began in late February. Mistry, director of Indian consumer goods company Godrej International, projected that palm oil futures would first extend gains to around RM5,000 by June before potentially reaching RM5,200 by mid-July, underpinned by biodiesel demand. Among the most closely watched analysts in the edible oils market, Mistry’s price forecasts have a history of moving markets.

The rally in energy markets has been a key driver, with global crude oil prices hitting a four-year high of more than US$126 per barrel last week, making the use of vegetable oils for biofuel production increasingly attractive. Mistry noted that refined fuels such as diesel and gasoline had risen more sharply than crude oil after the Iran war began. This narrowed the spread between fossil diesel and palm biodiesel, reducing subsidy requirements and, in some markets, making palm biodiesel cheaper than its fossil fuel equivalent.

“Rising energy prices prompted Indonesia to reinstate its B50 palm biodiesel programme from July 1, 2026,” Mistry said. Indonesia, the world’s largest palm oil producer, has confirmed it will raise its mandatory palm-based biodiesel blending rate to 50 per cent from the current 40 per cent, effective July 1. Mistry added that biodiesel mandates are also being raised in Malaysia, Thailand, and other countries.
Palm oil faces competition from soybean oil, which has rallied in recent weeks as the United States, Brazil, and Argentina ramp up its use for biofuels. Mistry said the US announcement of a large biodiesel programme for 2026 and 2027 had sharply lifted soybean oil futures.
“The US has announced its long-awaited jumbo biodiesel programme for 2026 and 2027, which has, as expected, lit a fuse under soybean oil futures,” he said.

Higher edible oil prices are already leading to demand destruction in key consuming nations. Mistry said India, one of the world’s largest buyers of edible oils, had seen its stocks fall and would need to significantly step up imports from June to meet domestic requirements.