Week 26 analysis: Palm oil, soy oil, and rapeseed prices retreat following geopolitical de-escalation

June 24, 2025 – Vesper Market Intelligence

Vegetable oils markets experienced widespread declines this week as cooling Middle East tensions and falling crude oil prices weighed on commodity sentiment. The sector’s close correlation with energy markets became evident as Brent crude dropped nearly $5 per barrel to $71.48, following diplomatic efforts to de-escalate the Israel-Iran conflict.

Key market movements

Palm oil led the decline, with BMD crude palm oil (CPO) falling $7 to $955/mt amid dual pressures from weaker energy prices and unexpectedly high Indonesian inventory levels. Indonesian palm oil stocks surged 50% to 3.046 million metric tons in April, significantly exceeding market expectations of 2.5 million tons maximum.

Soybean oil dropped $34/mt to $1,174/mt on CBOT, pressured by both energy price weakness and improving weather conditions across the U.S. Corn Belt. The National Weather Service forecasts warm, wet conditions that could create optimal growing conditions for American oilseed crops.

Rapeseed oil showed relative resilience, with MATIF prices holding EUR 6 above the previous week at EUR 499/mt, supported by strong physical demand in Europe and Ukraine despite the broader market weakness.

Geopolitical impact on energy complex

The vegetable oils sector’s sensitivity to crude oil movements was on full display this week. President Trump’s announcement of a negotiated ceasefire between Israel and Iran initially drove energy prices lower, though subsequent ceasefire violations and renewed tensions added volatility to the complex.

Market participants are closely monitoring the fragile diplomatic situation, as any escalation could quickly reverse current price trends across energy-dependent agricultural commodities.

Supply-side developments

Beyond geopolitical factors, fundamental supply dynamics are reshaping market expectations:

  • Indonesian palm oil exports declined 38% month-over-month to 1.779 million tons, contributing to the inventory buildup
  • U.S. soybean prospects improved with favorable weather forecasts creating “greenhouse effect” conditions
  • Canadian canola harvest estimates reached 18.8 million tons, though stocks are expected to tighten significantly

Specialty oils show mixed performance

While major oils declined, specialty segments displayed varied performance:

  • Sunflower oil gained EUR 10/mt to EUR 1,073/mt, though analysts expect this strength to be temporary
  • Palm kernel oil strengthened to $1,474/mt, supported by Malaysia’s upcoming 5% sales tax implementation
  • Olive oil prices rose on Spanish heat concerns threatening the upcoming harvest

Market outlook and strategic implications

Vesper’s proprietary machine learning models indicate divergent paths for major oils in the coming months. The interplay between seasonal demand patterns, harvest timing, and ongoing geopolitical uncertainties will likely drive significant volatility through the summer months.

Key factors to monitor include:

  • Evolution of Middle East tensions and crude oil price stability
  • U.S. weather patterns during critical crop development periods
  • Indonesian export performance and inventory management
  • European harvest outcomes amid variable weather conditions

Read the full oils & fats market analysis for week 26 here: https://app.vespertool.com/market-analysis/2035