Soybean and palm oil quotes rose following oil prices, but prices in physical markets remain stable

Despite a 13% increase in oil prices late last week, vegetable oil prices remained almost unchanged, remaining at their highest levels since 2022.

June Brent crude futures rose 7.8% to $110/barrel (+18% in two weeks) due to the breakdown of negotiations between the US and Iran and expectations of a new escalation in the Persian Gulf. But yesterday, quotes began to decline after Trump announced the suspension of the “Project Freedom” to withdraw ships from the Persian Gulf, which began on Monday, explaining this by preparing a major deal with Iran. However, we recall that the IRGC responded with two massive attacks on the UAE, so it is not clear who Trump should sign the deal with.

The biggest "profit" from the rise in oil prices was not palm oil quotes, which usually have the same dynamics as oil prices, but soybean oil quotes in the US.

May soybean oil futures on the Chicago SWOT rose 6.2% over the week to the highest level since spring 2022 of $1,696/t (+24% since the start of the Iran war).

The sharp rise in US quotes supported prices in physical markets, and during the week soybean oil prices in Brazil rose by $30-40/t to $1,240-1,260/t FOB. But South American soybean oil is offered at an incredible discount of $400-450/t compared to US soybean oil prices in Chicago.

June palm oil futures on Bursa Malaysia rose 3.8% during the week to a monthly high of 4,710 ringgit/t or $1,190/t. They are supported by rising oil prices and the Malaysian government's plans to start using 15% of oil in diesel by 2026.

The sharp drop in demand for palm oil from India in April is due to an increase in the supply of soybean and sunflower oil from Argentina, which is increasing sales.

In April, India doubled its sunflower oil imports compared to March, thanks to active supplies from Argentina.

Last week, demand prices for sunflower oil in India decreased by another $10/t to $1,400-1,405/t CIF Mumbai, which caused Russian sunflower oil prices to fall by $20-30/t to $1,290-1,300/t FOB.

Ukraine continues to face a shortage of sunflower and sunflower oil, especially after the recent damage to two oil transshipment terminals by Russian drones, so the demand prices for Ukrainian sunflower oil increased by another $5-10/t during the week to $1,325-1,335/t for delivery to Black Sea ports. The damage to the oil terminal in Chornomorsk last week again led to the loss of a significant amount of oil.

Markets continue to be supported by high oil prices, but the internal situation in Iran continues to deteriorate, so the regime will need to either negotiate peace quickly or lead the country into civil war due to food and water shortages.