PETALING JAYA: Analysts expect the rising crude oil prices and higher freight costs amid current tensions in the Middle East could improve biodiesel economics and strengthen demand for palm oil as a key feedstock.
In a note to clients, TA Research said higher diesel prices would enhance the attractiveness of biodiesel blending, particularly in Indonesia under its B40 programme, while the recent surge in energy prices would further incentivise greater biodiesel consumption.
Industry sources indicate that buyers across Asia have accelerated purchases to mitigate potential shipping disruptions and hedge against further price increases, providing near-term support to palm oil prices, according to the research house.
Indonesia, the world’s largest palm oil producer, is also reassessing the potential rollout of its delayed B50 biodiesel mandate following the surge in global energy prices.
A plantation analyst with a local research house said: “If implemented, this could materially increase domestic palm oil consumption and reduce export availability, thereby tightening global supply.”
TA Research, meanwhile, has kept its average crude palm oil (CPO) assumption at RM4,000 per tonne at this juncture.
It maintained “buy” calls on SD Guthrie Bhd
with a target price of RM6.33, Kuala Lumpur Kepong Bhd at RM24.38, IOI Corp Bhd at RM4.53, United Malacca Bhd at RM7.29, TSH Resources Bhd at RM1.53 and Kim Loong Resources Bhd at RM2.63 respectively.
On the positive side, RHB Research said the spike in crude oil prices, up 30.7% since the Middle East war started, has raised CPO prices by 11.6% in the same period.
This price spike has narrowed the palm oil-gas oil spread to a much lower US$19.95 per barrel from US$52 per barrel at the beginning of 2026.
“With this current lower spread, we estimate there will be enough money in the Indonesian biodiesel fund to even fund B50 at current export tax and levy rates.
“This could incentivise Indonesia to push through with the B50 mandate earlier than expected – which would be positive for CPO prices, as it would take away an additional four million tonnes of palm oil supply from the global market,” it noted.
On the negative side, RHB Research noted concern that palm oil demand might be affected due to the closure of shipping routes near the war zone.
Should this war drags on, both fertiliser and logistics costs will be affected and will also rise accordingly.
RHB Research has maintained its neutral sector weighting, with CPO prices at RM4,250 per tonne for 2026 and cost assumptions for now, given the volatile situation.
Maybank Investment Bank Research in a note to clients said it believes the Indonesian government may accelerate its B50 plan if crude oil prices stay above US$100 per barrel, especially if the Strait of Hormuz remains disrupted and foreign exchange savings are made by replacing expensive imported diesel with domestically produced palm biodiesel.
The research house’s 2026 CPO average selling price forecast is RM4,100 per tonne with upside potential if crude oil prices rally sustainably above US$100 per barrel and make Indonesia’s B50 a reality.
Among the planters under its coverage, TH Plantations Bhd and Genting Plantations Bhd are most sensitive to CPO price upside.
