Indonesia cancels plans to introduce B50 in 2026, sharply increasing pressure on palm oil prices

Indonesia, the world's largest palm oil producer, has abandoned plans to raise its fuel standard from B40 to B50 in 2026. This will sharply increase export supply and put pressure on prices in the near future, especially given the increase in palm oil stocks in Malaysia to a 7-year high.

February palm oil futures on the Bursa exchange in Malaysia fell 1.5% yesterday to 3,980 ringgit/t or $981/t (-1.5% for the week).

The transition to the B50 standard was supposed to increase domestic palm oil consumption by 2-3 million tons, but it was postponed due to technical and financial difficulties, so the B40 mandate will continue in 2026.

As a reminder, Indonesia's biodiesel program is subsidized through export duties. Therefore, to support the BPDP fund, the government will increase the export duty on palm oil from 10% to 12.5% from March 1, which, according to the producers' association (POPSI), will temporarily reduce its competitiveness on the world market.

In a January report, USDA experts raised their forecast for palm oil production in Malaysia in the 2025/26 MY from 19.5 to 19.7 million tons, which would be 1.7% higher than the 2024/25 MY, while production in Indonesia was estimated at 46.7 million tons, which would be 2.6% higher than the previous season.

Oil prices, after a speculative rise in anticipation of strikes on Iran, fell by 4.2% yesterday, adding pressure to palm oil quotes.

Under the pressure of falling oil prices, record inventories in Malaysia, and the cancellation of the transition to B50 in Indonesia, palm oil quotes could fall to 3,700-3,800 ringgit/t or $90-935/t within a month.