Palm oil pressured by strong Malaysian inventory while energy rally and trade talks boost soy complex

June 10, 2025 – Global vegetable oil markets are navigating a complex landscape of supply uncertainties and shifting demand patterns as crop forecasts face downward revisions and energy prices provide unexpected support. While palm oil faces inventory pressure in Malaysia, the soy complex has gained strength from rising energy costs and renewed U.S.-China dialogue, creating divergent price trends across the oils complex.

Energy rally provides unexpected market support

Brent crude oil prices surged to $67 per barrel from $64.63 the previous week, driven by geopolitical tensions involving the U.S.-Iran situation and Russia-Ukraine developments. OPEC+ appears reluctant to increase production quickly, supporting energy prices that are providing a crucial lift to biofuel-linked vegetable oils.

This energy price strength is particularly benefiting the soy complex, where CBOT soybean oil climbed to $1,045 per metric ton from $1,020, while soybean prices increased to $388 from $380 per metric ton week-over-week.

U.S.-China trade talks signal potential breakthrough

Renewed diplomatic engagement between Washington and Beijing is creating optimism in agricultural commodity markets. U.S. and Chinese delegations met in London this week, marking their second round of discussions following the first direct phone conversation between President Trump and President Xi since the January 20 inauguration.

Following the call, Trump reported that Xi agreed to resume shipments of rare earth minerals and magnets to the U.S., while Reuters indicated that China has granted temporary export licenses to rare-earth suppliers of the top three U.S. automakers. These developments are providing crucial support to the soy complex amid broader trade uncertainty.

Palm oil faces inventory headwinds

Malaysian palm oil markets are experiencing pressure from stronger-than-expected inventory builds. Stocks increased 6.65% in May to 1.99 million metric tons, while exports surprised positively at 1.387 million metric tons (+26% versus market expectations of 18-20% growth).

Production growth of 5% to 1.772 million metric tons exceeded market forecasts of 2-3%, highlighting the supply pressures facing the palm oil complex despite energy price support. BMD CPO spot prices declined to MYR 3,917 per metric ton from MYR 3,934 the previous week.

India’s decision to halve basic import taxes on crude edible oils to 10% could provide demand support, effectively reducing total import duties on crude palm oil, soyoil, and sunflower oil to 16.5% from 27.5%.

Rapeseed supply concerns intensify

European rapeseed markets are experiencing significant volatility as crop forecasts face downward revisions. Strategie Grains lowered its EU rapeseed production forecast for 2025/26 from 19 million tons to 18.6 million tons due to unfavorable weather conditions in key regions.

MATIF rapeseed contracts surged to EUR 491 per metric ton from EUR 473, while crude rapeseed oil (FOB Dutch Mill) increased to EUR 1,097 from EUR 1,080 per metric ton. The market’s sensitivity to crop forecast changes reflects tight ending stocks this season.

Ukraine’s rapeseed situation adds further complexity, with production potentially falling below expectations due to frost and drought in central and southern regions. Expected output of around 3.2 million metric tons compares unfavorably to last year’s 3.7 million tons.

Sunflower oil pressured by farmer selling

Sunflower oil markets are experiencing weakness as farmers actively seek buyers amid multi-month low seed prices. Ukrainian sunflower seed prices dropped to UAH 26,000 per metric ton ($626), with market participants suggesting further declines remain possible.

JAS crude sunflower oil prices (6 ports) weakened to EUR 1,040 per metric ton from EUR 1,052, attributed to slower demand and falling seed values. Seasonal crushing patterns typically slow after April/May in both Ukraine and Russia as plants switch to rapeseed processing and undergo maintenance.

Coconut oil shows resilience

Coconut oil markets demonstrated strength despite broader vegetable oil volatility, with crude coconut oil (EXW Manila) increasing to $2,524 per metric ton from $2,506. Lower Philippine export volumes are supporting prices, with April crude coconut oil exports falling to 61,000 metric tons from 95,000 tons in April 2024.

Palm kernel oil faced pressure from declining CPO prices, falling to $1,439 per metric ton from $1,598, though tighter Malaysian PKO stocks (down 6.24% in May to 288,114 metric tons) may provide support.

Policy uncertainty maintains market volatility

Trade policy developments continue to create uncertainty across vegetable oil markets. Legal challenges to emergency tariffs, with federal courts striking down and then reinstating duties, have left importers uncertain about payment obligations and future trade flows.

The 90-day tariff pause suggests potential policy shifts, while ongoing negotiations between the Trump administration and various trading partners add layers of complexity to market planning.

Market outlook depends on weather and diplomacy

Looking ahead, vegetable oil market direction will largely depend on weather developments across key growing regions and progress in international trade negotiations. Rapeseed markets remain particularly sensitive to European weather conditions in coming weeks, while palm oil faces the dual pressures of inventory management and seasonal demand patterns.

The interplay between energy prices, trade policy resolution, and crop development will continue to create volatile trading conditions across the oils complex.

This analysis highlights key developments from Vesper’s comprehensive Week 24 vegetable oil market intelligence report. Access detailed AI-powered price forecasts, regional supply analysis, and trade flow data on the Vesper platform: https://app.vespertool.com/market-analysis/1998