Week 25 market analysis: Brent crude spikes to $73.23/barrel amid Middle East tensions while US EPA proposes ambitious biofuel targets

June 17, 2025 – Vegetable oil markets experienced significant price movements this week as geopolitical tensions in the Middle East and stronger-than-expected US biofuel mandates created a perfect storm of bullish factors across the soft oils complex.

Key market drivers shape Week 25 performance

Brent crude oil jumped nearly 10% to $73.23 per barrel from $67.04 the previous week, driven by escalating tensions between Israel and Iran. The conflict has raised concerns about potential supply disruptions, particularly with Iran’s threats to close the strategically important Strait of Hormuz.

Simultaneously, the US Environmental Protection Agency (EPA) proposed ambitious biofuel blending obligations for 2026, setting targets at 5.61 billion gallons, significantly higher than the 5.25 billion gallons requested by industry and well above this year’s 3.35 billion gallons.

Palm oil leads gains on strong demand

BMD crude palm oil (CPO) prices climbed to MYR 4,100/mt from MYR 3,932/mt, supported by the broader energy complex rally and robust import demand from key markets including India and China. Malaysian palm oil exports showed impressive momentum, increasing 26.30% in the first half of June compared to the same period in May.

Soybean oil responds to policy developments

CBOT soybean oil rose $70/mt to $1,116/mt, with the EPA’s proposed renewable volume obligations providing strong fundamental support. The policy proposal includes provisions to halve Renewable Identification Number (RIN) credits for foreign biofuels, potentially creating additional demand for domestic soybean oil.

Market participants are closely monitoring the finalization of these regulations, as they could represent a significant shift in US biofuel policy and demand patterns.

Regional developments add complexity

European rapeseed oil markets showed mixed signals as traders balanced rising energy costs against expectations of increased EU production. COCERAL forecasts the 2025 EU-27 rapeseed crop at 19.2 million tonnes, up from 17 million tonnes produced last year.

Meanwhile, Ukrainian agricultural markets face potential policy changes, with parliament proposing a 10% export duty on rapeseed and soybeans to encourage domestic processing.

Market outlook and risk factors

Looking ahead, several factors will continue to influence vegetable oil markets:

  • Geopolitical developments: The Israel-Iran conflict remains a key risk factor, though analysts currently assess the probability of Strait of Hormuz closure as low
  • Weather patterns: European summer conditions will be critical for olive oil production, with El Niño/La Niña patterns still uncertain
  • Trade relations: Ongoing US-China trade discussions and potential EU tariff changes could impact market dynamics
  • Harvest timing: Upcoming harvests in key producing regions will test current price levels

Read the full market analysis of week 25 here: https://app.vespertool.com/market-analysis/2021