Domestic demand for small-packaged oil stockpiling before the Spring Festival is strong, and the estimated arrival volume of soybeans in the first quarter is expected to decrease month-on-month. The short-term tight supply and demand supports the price of soybean oil. However, the good weather in Brazilian producing areas has brought expectations of a bumper harvest, which, combined with domestic policy-driven reserves release, has jointly limited the room for price increases.
There is good news coming from the oil and oilseed market.
According to two people familiar with the matter, the Trump administration plans to finalize the 2026 biofuel blending quotas in early March. The overall quotas will basically remain as initially proposed, but the plan to impose penalties on imports of renewable fuels and their raw materials will be abandoned. The sources said the plan could be finalized in the coming months.
The U.S. Environmental Protection Agency said last year that it would raise the target for so-called biodiesel, which can be made from soybean oil and other crop raw materials, but traders have been waiting for the final details. Analyst Brett Gibbs said that if the target is adopted, biodiesel production will increase significantly.
Affected by this, the price of U.S. soybean oil futures surged by 3.81%. On the domestic front, the main rapeseed oil futures contract closed up 2.57% last night, while the main contracts of palm oil and soybean oil futures rose slightly.
Guo Wenwei, an analyst of oils and oilseeds at Huishang Futures, stated that the current focus of the market is on palm oil. The palm oil market is currently in a state where "negative factors have been fully digested and new driving forces are emerging". Although the inventory of Malaysian palm oil was at a historical high at the end of December last year, the market had already priced in this expectation in advance, and the release of the MPOB report instead became the starting point for a price rebound.
Guo Wenwei believes that the driving force of the current palm oil market has clearly shifted: on the one hand, Indonesia is still in the rainy season production reduction cycle from January to February; on the other hand, Indonesia's exports remain strong. In addition, the greater variable in the market comes from the policy level. Indonesia is considering raising the palm oil export tax. If this move is implemented, it will directly raise the global quotation center and significantly enhance the relative competitiveness of Malaysian palm oil. It is expected that palm oil is ushering in a key inventory inflection point.
The export growth data of Malaysian palm oil in the first 10 days of January is exceptionally eye-catching, especially the exports to India surging by nearly 50% year-on-year," Zhang Cuiping, an analyst of oils and oilseeds at Zhengxin Futures, told reporters. The strong export data, combined with Indonesia's signal of long-term supply tightening, have jointly prompted the market to shift its focus from the static high inventory to the dynamic expectation of tight supply and demand.
However, the road to a rebound in palm oil prices is not smooth sailing. Liu Jinlu, an analyst of oils and oilseeds at Guoyuan Futures, pointed out that the decline in Malaysian palm oil production in December last year was less than expected, leading to inventory accumulation reaching a phased peak, which constitutes a real pressure level for prices. Therefore, the market trading logic is shifting from "the reality of inventory accumulation" to "the expectation of inventory reduction", and the smoothness of this shift will determine the height of the rebound.
Compared with palm oil and soybean oil, rapeseed oil has shown relatively weak performance. "The rapeseed oil market is completely dominated by expectations of trade policies," analyzed Liu Jinlu. In the short term, the delay in the arrival of domestic rapeseed at ports and the reality of low inventories have formed a price floor; however, in the medium to long term, the expected easing of trade relations and potential policy adjustments triggered by the Canadian Prime Minister's visit to China have constituted significant long-term supply pressure. Guo Wenwei also stated that participants in the rapeseed oil market are waiting for the results of this week's China-Canada high-level meeting, and any news regarding tariffs or trade policies may trigger sharp fluctuations in the trading market.
Although domestic commercial inventories of rapeseed oil continue to decline, the market has strong expectations for the arrival of Australian rapeseed shipments and the loosening of policies regarding future imports of Canadian rapeseed. This expectation of loose supply in the long term has made it difficult for rapeseed oil to rebound, making it the weakest-performing variety among the three major edible oils," said Zhang Cuiping.
Looking at the soybean oil market, Guo Wenwei analyzed that the demand for small-packaged oil stockpiling before the Spring Festival in China is strong, and the estimated soybean arrivals in the first quarter are expected to decrease month-on-month. The short-term tight supply and demand will support the price of soybean oil. However, the good weather in Brazilian producing areas has brought expectations of a bumper harvest, which, combined with domestic policy-based reserve releases, has jointly limited the room for price increases.
Zhang Cuiping believes that there is a lack of new narratives in the international soybean market. However, domestic soybean oil inventories have dropped to a nearly five-month low. The reality of inventory reduction and expectations of a peak consumption season have made the price bottom relatively solid.
Looking ahead to the market outlook, Guo Wenwei believes that whether Indonesia's proposal to increase export taxes can be implemented, when it will be implemented, and the specific tax increase number will directly test the quality and sustainability of this round of palm oil rebound. This is not only a matter of cost support, but also a signal that will have a profound impact on the distribution of global demand.
In Zhang Cuiping's view, the support from domestic soybean oil consumption during festivals still exists. Therefore, it is difficult for the fundamentals of soybean oil to undergo significant changes in the first quarter, and the overall downside support remains solid.
The future market will enter a phase of expectation verification. For palm oil, the focus of the market will shift from 'whether inventory will be reduced' to 'how fast inventory will be reduced', and high-frequency export and production data need to be continuously monitored; soybean oil will continue its range-bound volatility pattern of 'having a ceiling above and a floor below' until South American production is fully confirmed; the rapeseed oil market will continue to struggle between tight spot supply and policy expectations, and a trending market may emerge," said Liu Jinlu.
