Oil Supports Sunflower Oil Prices, but Oversupply Limits Growth

Global prices for vegetable oils remain unstable due to fluctuations in the oil market and changes in the balance of supply and demand. Soybean and rapeseed oils respond to spikes in oil prices; however, the increase in supply, particularly from Ukrainian products, continues to exert downward pressure on quotes.

Instability in the Middle East has led to sharp fluctuations in the oil market, which has also affected agricultural futures quotes, including vegetable oils.

Last week, September futures for Brent crude oil rose by 13.5% to $101 per barrel. At the same time, at the beginning of the current week, prices corrected by about 20%, although the overall increase over the month remained at 13.5%. At the start of new trading, quotes rose again by 4.8% amid escalating tensions following attacks by Iran-backed forces from Iraq on American military bases.

Despite significant fluctuations in the oil market, palm oil remains relatively stable. Futures for palm oil on the Bursa Malaysia exchange have increased by only 0.7% over the past seven days to 4,642 ringgit per ton, or about $1,136 per ton. This level is nearly in line with figures from three weeks ago.

Support for palm oil quotes is provided by an increase in exports from Malaysia. According to surveyors, shipments in the first 25 days of July increased by 8.1% to 15.9% compared to the same period in June. An additional factor has been the increased demand from the European Union amid reduced purchases from India.

At the same time, soybean oil futures on the Chicago Board of Trade (CBOT) fell by 5.6% over the week to $1,520 per ton. The market reacted to the drop in oil and soybean prices at the beginning of the week. Meanwhile, spot prices for soybean oil in Brazil remained almost unchanged, ranging from $1,205 to $1,215 per ton FOB, while futures on the Dalian exchange in China for August delivery traded at $1,250 to $1,255 per ton.

Prices for sunflower oil in India rose by $5 over the week to $1,455 to $1,465 per ton CIF Mumbai due to reduced supply from Ukraine. Russian suppliers took advantage of this by raising their prices by another $20 to $1,350 to $1,365 per ton FOB.

In China, demand prices for new crop sunflower oil remain stable at $1,360 to $1,380 per ton CIF for September delivery.

In Ukraine, purchases of sunflower oil for delivery to Black Sea ports have virtually stopped due to regular shelling. At the same time, offers for supplies to Danube ports remain at $1,320 to $1,335 per ton.

The situation with exports also affects the rapeseed market. Due to attacks on Ukrainian ports and civilian vessels, maritime transport remains effectively blocked, leading to an increase in the supply of Ukrainian rapeseed in the European market for August-September delivery.

The increase in volumes of Ukrainian products has been one of the main factors putting pressure on rapeseed and rapeseed oil prices in the EU. Additional market instability is created by fluctuations in oil quotes.

November rapeseed futures on the Paris exchange have fallen by 4.6% over the past seven days to €531 per ton, although they remain up 2.3% over the month. At the same time, prices for rapeseed oil in the EU fell by $50 to $60 to $1,490 to $1,510 per ton FOB Netherlands due to expectations of increased supplies of cheaper Ukrainian products.

Demand for rapeseed oil for delivery to the western border of Ukraine remains at €1,050 per ton or about $1,190 to $1,200. For deliveries to the EU, the price is $1,250 to $1,260 per ton. At the same time, purchase prices for the Chinese direction have decreased by $20 to $25 to $1,250 to $1,260 per ton CFR.

It is expected that the decline in rapeseed and rapeseed oil prices in Europe may slow down in the near future due to reduced forecasts for rapeseed and sunflower yields in the EU. Additional support for the market may come from new fluctuations in oil prices.

It should be noted that there is a rapidly growing demand for sunflower oil globally, as buyers are increasingly turning away from expensive palm oil. However, for Ukrainian factories, this boom has become a challenge: due to fierce competition from other countries, the profits of our processors have begun to decline.