Middle East conflict could spur palm oil demand from biodiesel sector

Core Insights - The ongoing Middle East conflict is expected to increase palm oil demand from the biodiesel sector and food use due to rising crude oil prices and higher freight rates [1][1][1] Industry Summary - Indonesia and Malaysia's palm oil output reached a record high in 2025, leading to increased stocks and downward pressure on prices [1] - The conflict has made palm oil more appealing to the biodiesel industry, resulting in prices rising to their highest levels in over a year [1] - Palm oil is currently trading at a significant discount to gasoil, creating a lucrative spread that could enhance demand from the biodiesel sector [1] - Indonesia, the largest user of palm oil-based biodiesel, is considering reviving its B50 biodiesel plan to address rising crude oil prices, after previously shelving it due to technical and funding issues [1] - A long-term policy shift in countries like Indonesia may occur if palm oil consistently trades at a discount to gasoil over an extended period [1] Market Dynamics - Palm oil is widely used in various products, accounting for over half of global vegetable oil shipments, with strong demand from emerging markets, particularly India [1] - Southeast Asia is well-positioned to supply palm oil to buyers in Asia, the Middle East, and Europe, with ample supplies available for quick shipping [1] - Despite the ample supply, palm oil has become more expensive than soyoil, which may limit potential demand increases [1]