Palm oil futures in Malaysia rose 1.84% on March 12, driven by gains in rival vegetable oils and the prospect of demand for B50 biofuel from Indonesia.
Malaysian palm oil futures recorded gains for the second consecutive session on March 12, closely following positive developments in rival vegetable oil markets. The weakening ringgit and rising crude oil prices were also key factors bolstering investor sentiment.
Vegetable oil markets rose across the board
The FCPOc3 palm oil contract for May 2026 delivery on the Bursa Malaysia exchange ended the morning session up 83 ringgit, or 1.84%, at 4,582 ringgit (approximately US$1,166.5) per ton. Earlier in the day's trading session, the price had briefly touched a high of 4,628 ringgit per ton.
This upward trend was strongly supported by the Dalian Commodity Exchange, where soybean oil prices rose 2.21% and palm oil prices increased 3.55%. In Chicago, soybean oil contracts also recorded a 1.18% gain. Because palm oil competes directly for market share with other vegetable oils, positive movements on international exchanges always create a noticeable ripple effect.
Impact of exchange rates and energy prices
The Malaysian ringgit fell 0.38% against the US dollar in today's trading session. The weaker domestic currency makes palm oil cheaper for foreign buyers, thus stimulating demand. In addition, the ongoing conflict in the Middle East has caused crude oil prices to surge due to concerns about disruptions to global supply.
High crude oil prices have made palm oil an attractive alternative feedstock for biodiesel production. Notably, Indonesia – the world's largest palm oil producer – is accelerating road trials for its B50 biofuel blend (containing 50% palm oil). This move is aimed at addressing tightening crude oil supplies and rising logistics costs.
Challenges related to transportation costs and export taxes
Despite rising prices, the market still faces some pressure. According to the Indonesian Palm Oil Association (GAPKI), shipping and insurance costs have surged by 50% as ships have had to change to longer routes to avoid conflict zones. This has led to a slowdown in exports in both Indonesia and Malaysia, raising concerns about potentially high inventories.
In terms of policy, the Malaysian Palm Oil Council has raised the benchmark price for crude palm oil for April to 3,935.19 ringgit (approximately US$1,002) per ton. This decision means that the export duty will increase to 9.5%, higher than the 9% applied in March.
Based on technical analysis by Reuters expert Wang Tao, palm oil prices are likely to correct slightly to the 4,494-4,514 ringgit/tonne range before retesting the 4,616 ringgit/tonne resistance level in the short term.