Palm and soybean oil prices are rising in response to the recovery in oil prices

Oil prices started to rise again due to renewed tensions in the Middle East, which immediately affected the quotations of palm and soybean oils, which were trading at minimum levels last week. Hamas rejected a US proposal for a cease-fire in Gaza, which was also supported by Israel, and Hezbollah again attacked Israel with more than 320 rockets, which was retaliated by Israeli airstrikes with more than 100 planes.

Over the past two sessions, October Brent crude oil futures rose 4% to $79 per barrel (down 1.6% for the month). Expectations of an open attack on Israel increased again, increasing speculative demand for oil.

December soybean futures in Chicago were up 4.4% for the week at $890 a tonne, partially offsetting a 6.8% drop the previous week and down 3.5% overall for the month.

October palm oil futures on Bursa Malaysia rose 5.1% for the week, the biggest weekly gain since mid-June 2023, to 3,869 ringgits per tonne, or $885 per tonne.

The rise in prices did little to curb the further decline in palm oil exports from Malaysia for the first 20 days of August by 16.7-18.4% (according to surveyors Societe Generale de Surveillance (SGS), Intertek Testing Services and AmSpec Agri Malaysia).

Indonesia's plans to increase the share of biodiesel in the mix to 40% in January from the current 35%, as well as growing demand from major buyers China and India, are supporting the price, according to traders.

Indonesia's energy ministry tested biodiesel mixed with 40% palm oil on trains in July and plans to conduct several more tests on power plants, agricultural machinery and the shipping industry, which are expected to be completed in December.

Higher consumption of palm oil for biodiesel in Indonesia, which is expected to be around 15 million tonnes per year, will reduce exports and increase demand for oil from Malaysia.