Vegetable oil prices fall due to Indonesian and Russian intentions to increase exports, but they are supported by the oil market

Russia's military aggression against Ukraine continues to affect world markets, as it leads to strong price volatility due to the breakdown of logistics chains and the policy of exporting countries to limit exports in order to curb domestic prices.

The Indonesian government announced on May 20 that producers now have to supply part of their refined oil to the domestic market and have 2 million tons in stock under a quota of 10 million tons, while state stocks will be maintained at 10% of domestic demand. Quotes on palm oil last week responded with a 7% increase.

On Friday, the Indonesian Ministry of Commerce said it would allocate 1 million tonnes of palm oil for export and would give preference to those with government export licenses. Following this news, the quotations of palm oil on the stock exchange in Malaysia fell by 2% to 6232 ringgit / t or $ 1426 / t.

According to the USDA, Indonesia will export 27 million tons of palm oil in 2021/22, but the sharp restriction of exports by the state has not reduced domestic prices, but raised world prices to record levels and forced exporters to restrain sales in anticipation of resumption of supplies.

To stabilize domestic prices, the Russian Ministry of Agriculture in early 2022 introduced quotas on sunflower oil exports from April 15 to August 31 amounting to 1.5 million tons. $ 2100 / t FOB.

Sanctions against Russia reduce demand for its products, but with a shortage of supply, importers are actively buying Russian oil, so the Ministry of Agriculture is proposing to increase the quota by another 400,000 tons.

Vegetable oil prices will support further increases in oil prices, as EU governments have agreed to impose an embargo on a new package of sanctions against Russia. Imports of two-thirds of Russia's oil, other than that supplied by the pipeline, will be banned. The sixth package of sanctions also includes disconnecting Sberbank from the SWIFT system and banning the broadcasting of three state-owned Russian media outlets in the EU.

In July, Brent oil futures responded to the EU's decision to cut Russian oil imports by 90% by 90% to $ 122.3 / barrel (+ 7.8% for the week) and WTI oil futures. - by 3% to $ 118.5 / barrel (+ 7.5% per week).