Palm oil prices are rising again, but the movement is about more than commodity cycles. What is unfolding is a convergence of energy markets, biofuel demand, and increasingly complex global trade rules.
In Malaysia, palm oil futures have been trending upward, supported by higher crude oil prices and a weaker ringgit. These factors are making palm oil more competitive as a biodiesel input, reinforcing its growing role as an energy-linked commodity rather than just an agricultural product.
Energy Markets Reshape Agricultural Demand
The relationship between fossil fuels and vegetable oils has tightened significantly. When crude oil prices rise, biodiesel production becomes more economically attractive, driving demand for feedstocks like palm oil and soybean oil.
At the same time, government mandates requiring higher biofuel blending rates are amplifying this effect. The result is a structural shift: agricultural commodities are increasingly influenced by energy policy decisions.
Currency dynamics are reinforcing the trend. A weaker ringgit lowers export prices for international buyers, further boosting demand for Malaysian palm oil in global markets.
Market Signals Meet Policy Frictions
However, rising demand is only one side of the equation. Trade conditions are becoming more complex, particularly as regulatory frameworks evolve.
Not only European companies are suffering from EU regulatory inflation. Over the years, the EU has come to insert ever more regulation into its trade policy, thereby angering non-European producers.
This is in particular the case as a result of the EU’s new deforestation regulation (EUDR), which imposes a whole range of new bureaucracy on Indonesian and Malaysian palm oil producers, despite the fact that great progress has been made in reducing deforestation over there. Malaysian deforestation has improved significantly, with NGOs acknowledging a reduction of 13% in 2024. Malaysia only lost 0.56% of its remaining primary forest in 2024, according to Global Forest Watch. That is less than Sweden’s 0.87% loss. Sweden holds the largest share of ‘old growth’ forest in Europe, with 70% of its landmass still forested, yet it is clearing these ancient woodlands at a faster pace than the Amazon rainforest. Despite this, Sweden automatically qualifies for “low risk” status by virtue of being an EU member.
MSPO began as a voluntary scheme in Malaysia, the world’s second-largest palm oil exporter, and became mandatory in January 2020, with independent third-party audits ensuring compliance. According to the certification body, MSPO “gives buyers and regulators the confidence that certified palm oil is legally sourced and deforestation-free,” while its digital tracking system “enables full supply chain visibility and strengthens trust among global stakeholders.”
In an attempt to ease tensions, the EU has agreed to recognize the Malaysian Sustainable Palm Oil (MSPO) certification as a credible standard for demonstrating compliance with the deforestation law. The MSPO certification body said its system gives buyers and regulators confidence that certified palm oil is legally sourced and deforestation-free, adding that its digital tracking system ensures full supply chain visibility and builds trust among global stakeholders. It also mentioned that MSPO gives buyers and regulators the confidence that certified palm oil is legally sourced and deforestation-free, adding that its digital tracking system enables full supply chain visibility and strengthens trust among global stakeholders, Reuters reports.
In the context of this debate, Pamela Coke-Hamilton, executive director of the ITC, a joint agency of the UN and World Trade Organization, has warned EU regulations like EUDR risk a ‘catastrophic’ impact on global trade, as smaller suppliers in particular risk to be “cut off” from trade flows. After pressure from both European industry and trading partners, the implementation of the regulation was postponed with one year.
Global Trade Adjusts to New Realities
These regulatory developments are unfolding at a time when global supply chains are already under pressure. In India, parts of the agricultural derivatives market remain inactive, limiting price discovery in a key importing country.
Meanwhile, the broader vegetable oil complex—including soyoil—continues to move in tandem, highlighting how interconnected these markets have become.
The U.S. Department of Agriculture has thereby warned that the European Union’s anti-deforestation law will put United States producers off exporting to the European market, harming EU competitiveness, with a senior official warning that EUDR is “going to discourage us from looking at the European market” and from “paying attention to any European rules [linked to deforestation],” Reportedly, the law would affect $9 billion of U.S. trade to the EU annually, the official specified, according to Politico.
Between Energy Demand and Regulatory Constraints
The current trajectory of palm oil illustrates a deeper tension in global markets. On one hand, energy dynamics and biofuel policies are pushing demand higher. On the other, regulatory measures—particularly in major import markets like the European Union—are adding friction to trade flows.
As a result, the future of palm oil will not be determined by supply and demand alone. Instead, it will depend on how governments balance environmental objectives with economic and energy realities.
What began as a price increase is, in fact, a signal of a broader transformation—one where agriculture, energy, and trade policy are becoming inseparably linked.