EU Biofuel Policies Cool Palm Oil Demand While Prices Stay Supported

EU palm oil demand is increasingly shaped by biofuel restrictions: key import hubs such as the Netherlands and Italy remain central to trade, but overall energy-sector use is weakening even as global prices stay historically firm. Across Europe, buyers are reassessing palm oil’s role in their feedstock mix. Several large member states have scaled back purchases between 1 July and 18 October 2026 as palm-based biodiesel is progressively excluded from national renewable fuel mandates. At the same time, relatively high global vegetable oil prices and weather risks in Southeast Asia are preventing a major price correction. This is pushing exporters to pivot toward food, oleochemical and non-EU destinations, while EU refiners and biofuel producers rebalance toward alternative oils.

Prices & Market Tone

Benchmark crude palm oil prices remain elevated compared with long-term averages, supported by tight nearby balances and weather-related uncertainties, even as some EU demand segments soften.

• Malaysia physical CPO is indicated around the low–mid USD 1,070s per tonne as of 3 November 2026, slightly lower week-on-week but still trading at a discount to soybean and sunflower oil.
• CIF Rotterdam palm oil values for November are quoted near USD 1,500–1,550 per tonne, having eased modestly in late October but remaining well above levels seen earlier in the year.
• Bursa Malaysia CPO settlements have softened from late-October highs, slipping from above MYR 4,750 to the mid‑4,500s per tonne by 3 November, signalling some near-term consolidation.

Overall price action suggests a market caught between structural policy-driven demand headwinds in Europe and ongoing support from biofuel mandates elsewhere and concerns about future Southeast Asian supply.

EU Trade Flows & Policy-Driven Demand Shifts

Palm oil imports into major EU buyers are declining as restrictions on palm oil-based biofuels reduce demand from the energy sector and reconfigure vegetable oil procurement strategies.

• Between 1 July and 18 October 2026, several key importing countries cut palm oil purchases versus the same period a year earlier, in line with EU moves to phase down palm oil as a feedstock in renewable fuel quota systems.
• The Netherlands remains Europe’s largest palm oil trading hub, importing roughly 302,000 tonnes in the reporting window and acting as a central entry and processing point for the wider EU market.
• Italy is the second-largest destination with about 196,000 tonnes, but its volumes fell 29% year-on-year, underscoring how national biofuel policies can rapidly curtail demand.
• Spain maintained stable imports at just above 115,000 tonnes, suggesting more balanced demand between energy and food/industrial segments.

Northern and western member states display a particularly strong pullback, highlighting the regulatory effect.

• Germany’s imports slipped to roughly 70,600 tonnes, about 5% lower year-on-year, pointing to a gradual but persistent demand erosion.
• Belgium saw a steep contraction, with volumes down 40% to around 22,800 tonnes, while Denmark’s imports dropped about 34% to 11,560 tonnes.
• These shifts mirror the progressive exclusion of palm-based biodiesel from renewable fuel quotas and reduced attractiveness of palm as a biofuel feedstock.

By contrast, some EU markets are leaning more heavily on palm oil despite the broader downtrend.

• Greece’s imports increased to about 33,000 tonnes in the period, while France and Sweden also registered higher arrivals versus last year.
• Diverging trends reflect differences in national energy policy, the relative importance of food and industrial uses, and available refining capacity.

For exporters, this fragmentation means the EU is no longer a homogeneous demand center; targeted marketing and logistics strategies are increasingly essential.

Fundamentals & Competing Oils

Despite weakening EU biofuel demand, the broader vegetable oil complex remains relatively tight, underpinning palm oil’s price floor.

• Recent comparison data show palm oil trading at a notable discount to soybean, sunflower and rapeseed oils, helping maintain its competitiveness in food manufacturing and in non‑EU biodiesel programs.
• Settlement data for CIF Rotterdam crude palm oil through October point to firm values in the USD 1,450–1,550 range, reflecting high carry and ample nearby supply but no sharp surplus.
• In Southeast Asia, elevated stocks and strong production earlier in the season have limited upside, even as forward curves start to price in weather-related yield risks for 2027.

Within the EU, the removal of palm oil from parts of the biofuel mandate framework is accelerating substitution into alternative feedstocks where economically viable.

• Rapeseed oil retains a key role in European biodiesel production owing to local supply and policy preferences, while used cooking oil and other waste-based feedstocks gain traction where incentivised.
• Palm oil, facing higher compliance and reputational costs, is increasingly channeled into food processing, oleochemicals and export markets outside Europe.

Weather & Production Outlook

Weather in major producing regions is a key medium-term bullish risk, even if short‑term field conditions are mixed.

• Recent monitoring shows near-normal rainfall in much of Peninsular Malaysia and Kalimantan, but below-normal precipitation in Sabah and Sumatra, raising early concerns about moisture stress.
• Regional climate outlooks for October–December 2026 flag a high probability of below-normal rainfall and above-normal temperatures across the Maritime Continent, consistent with an El Niño pattern.
• Analysts warn that prolonged dryness typically depresses palm yields with a 9–12 month lag, implying potential output pressure in late 2027 if current deficits persist.

For now, ample stocks buffer supply, but the market is increasingly sensitive to any confirmation of sustained rainfall deficits, particularly in core Indonesian and Malaysian estates.

Outlook & Trading Considerations

Over the coming months, EU palm oil demand is likely to stay under pressure where national regulations continue to curb palm-based biofuels, even as food and industrial uses lend a more stable baseline.

• Exporters oriented toward Europe should prioritise higher-value food and oleochemical demand, while deepening exposure to fast-growing non‑EU markets where biofuel mandates still favour palm.
• European refiners and biofuel producers may keep diversifying into rapeseed, sunflower and waste oils, locking in supply while palm retains a price discount in discretionary food applications.
• Given the combination of high nearby stocks and mounting 2027 yield risk, market participants may consider staggered hedging strategies: using current price softness for limited coverage while retaining flexibility in case of a weather-driven rally.

3-Day Directional Price Indication

• Malaysia CPO futures (Bursa Malaysia): Mildly soft to sideways; recent declines and high stocks suggest limited upside in the next 3 days, barring a sharp shift in macro sentiment.
• CIF Rotterdam palm oil: Slight downward or range-bound bias as EU biofuel demand remains weak and buyers focus on nearby coverage rather than aggressive restocking.
• Competing oils (soy, sun, rapeseed): Stable to marginally firmer relative to palm, maintaining palm’s discount and supporting its role in price-sensitive food and industrial demand.