Coconut oil prices at origin fell sharply this week, with the EXW Manila benchmark declining to $1,918/mt from $2,271/mt previously, as biofuel producers in the Philippines grew concerned about potential policy changes affecting domestic demand.

Two developments are driving that uncertainty. The Philippines House of Representatives voted in favour of a bill that would allow the President to suspend the mandatory use of biofuels for up to one year, citing fuel price inflation linked to the Middle East conflict. Separately, the Philippine Department of Energy (DOE) proposed allowing biofuel imports if the price of biofuel-blended fuels exceeds pure fossil fuels by more than 5%, also for a maximum period of one year.

Neither measure has entered into force. The Philippine Senate adjourned for a six-week recess without taking up either proposal. At the same time, biofuel groups and farmers are lobbying for the opposite approach, calling for higher blending mandates rather than increased imports.

The result is a market that, by the analysis’s own assessment, remains highly uncertain.

On the palm kernel oil side, prices moved in the opposite direction. DAP Malaysia crude palm kernel oil closed higher at around $2,134/mt, compared with $1,936/mt previously. CIF Rotterdam prices were trading near $2,293/mt (May/June), up from $2,270/mt. Market direction going forward is expected to be influenced by the broader palm oil complex, while weaker coconut oil prices at origin may act as a bearish factor for palm kernel oil.

What to watch

Looking further ahead, a seasonal recovery in coconut oil production could put additional downward pressure on prices in Q2. The Middle East conflict is currently making deliveries of lauric oils to Europe more expensive and more time-consuming, though it remains uncertain whether these disruptions will persist into Q2.

In Q3, coconut oil prices are expected to remain under pressure due to strong anticipated output, although typhoon risks in the Philippines could introduce periods of volatility. Both coconut oil and palm kernel oil may face upside price risks in Q4, as mills typically reduce crushing activity during November and December.

Read the full analysis here: https://app.vespertool.com/market-analysis/2823