Key Market Overview

The edible oil markets showed divergent trends this week, driven by a rally in crude oil and fundamental factors. Palm oil led the gains, followed by rapeseed oil, while soybean oil underperformed. WTI crude oil surged over 10.0% weekly due to US-Iran tensions and shipping disruptions in the Strait of Hormuz, providing support to the entire oils complex.

Price Performance

In futures, the soybean oil 2609 contract closed at 8,620 yuan/ton, up 85 yuan or 1.00% week-on-week. The palm oil 2609 contract settled at 9,570 yuan/ton, gaining 338 yuan or 3.66%. The rapeseed oil 2609 contract ended at 10,281 yuan/ton, a rise of 345 yuan or 3.47%. In the spot market, Guangdong palm oil was quoted at 9,370 yuan/ton, up 240 yuan or 2.63%, with a spot basis of P09-200. Tianjin first-grade soybean oil was at 8,630 yuan/ton, down 10 yuan or 0.12%, with a basis of Y09+10. Jiangsu fourth-grade rapeseed oil was at 10,781 yuan/ton, increasing 345 yuan or 3.31%, with a spot basis of OI09+500.

Palm Oil Supply and Demand

On the supply side, data from the Southern Peninsula Palm Oil Millers Association (SPPOMA) for July 1-20, 2026, showed Malaysian palm oil production fell 0.77% month-on-month, with fresh fruit bunch yields down 1.56% and oil extraction rates up 0.15%, tempering expectations of a production surge. For exports, ITS data indicated a 4.1% increase in Malaysian palm oil exports for July 1-20, while AmSpec reported a 0.9% decline and SGS data showed a 31.44% drop, highlighting divergent trends. According to Mysteel, China added one new palm oil cargo (for November shipment) this week, with previous shipments arriving. During the period, domestic key oil mills sold 2,500 tons of palm oil, with average daily sales of 500 tons, down 13 tons or 2.46% from last week. In inventories, Mysteel data as of July 17 showed palm oil commercial stocks at 80.24 million tons in key regions, up 4.38 million tons or 5.77% from the previous week, and up 21.10 million tons or 35.68% year-on-year, reaching a three-year high. Indonesia's B50 policy has officially started, providing a boost for forward months, though high stocks and cash discounts in producing regions are capping gains.

Soybean Oil Supply and Demand

For supply, China imported 13.547 million tons of soybeans in June 2026, up 10.46% year-on-year and 14.89% month-on-month. Total imports for January-June were 50.154 million tons, up 1.5% year-on-year. According to Mysteel, actual soybean crushing in week 29 (July 11-17) was 2.2553 million tons, producing 427,400 tons of soybean oil with a crushing rate of 62.1%. Estimated soybean oil production for week 30 (July 18-24) is 471,800 tons, with a projected crushing rate of 68.38%. In the domestic market, bulk soybean oil sales totaled 81,800 tons, with average daily sales of 16,400 tons, up 128.17% from last week, indicating a temporary recovery. For inventories, a survey of 114 sample plants showed soybean oil commercial stocks at 1.3888 million tons as of July 17, up 85,500 tons or 6.56% from the previous week, and up 125,900 tons or 9.97% year-on-year, with mounting inventory pressure. The USDA's soybean crop condition rating stood at 66% good-to-excellent, while CBOT soybean oil closed at 72.73 cents per pound, up 2.5%, continuing its strength.

Rapeseed Oil Supply and Demand

According to Mysteel, coastal oil mills crushed 133,200 tons of rapeseed as of July 17, up 17,600 tons from the previous week, as arrivals improved and operating rates edged higher. Weekly rapeseed oil production was 55,900 tons, an increase of 7,400 tons. Deliveries from coastal mills were 50,944 tons, down 3,108 tons, with weak end-user demand and thin trading. In stocks, national imported rapeseed inventories stood at 300,800 tons, down 91,200 tons (or 23%), with Fujian holding 160,800 tons, Guangdong 25,000 tons, and Guangxi 115,000 tons. Coastal rapeseed oil stocks were 37,500 tons, up 5,000 tons (or 15%), while unexecuted contracts rose 11,000 tons to 252,000 tons. East China commercial rapeseed oil stocks were 326,500 tons, up 26,500 tons from the previous week. The market is in the off-season, with only sporadic essential purchases, resulting in generally low activity. The national average spot price for third-grade rapeseed oil was 10,406 yuan/ton, up 76 yuan/ton from the previous week.

Market Analysis

This week, domestic edible oils displayed divergent trends driven by the crude oil rally and fundamental factors, with palm oil leading, rapeseed oil following, and soybean oil remaining weak. The sharp rise in crude oil, boosted by the US-Iran conflict and shipping disruptions in the Strait of Hormuz, provided underlying support. Palm oil saw the largest gains, driven by the crude oil surge, weather premiums, and Indonesia's B50 policy. Rapeseed oil performed strongly due to low domestic stocks and high basis levels. Soybean oil lagged, pressured by high inventories. The soybean oil-palm oil and soybean oil-rapeseed oil spreads widened, with the September contract spread at -970 and 1,630, respectively, as of July 23.

For soybean oil, the USDA's crop progress report showed the US soybean good-to-excellent rate at 66% as of July 19, recovering from 65% the previous week but below 68% last year. Hot and dry weather in the Midwest is providing a weather premium for US soybeans. China's continued purchases of US soybeans, totaling over 1.6 million tons, are providing cost support for CBOT soybeans. ANEC data shows Brazil's July soybean export estimate revised down to 13.5 million tons (from 13.76 million tons), though still above last year's 11.94 million tons, keeping South American supply ample. CBOT soybean oil is strengthening on spillover from the crude oil rally. Domestically, China imported 13.547 million tons of soybeans in June, and Mysteel data indicates total arrivals at sample mills for July, August, and September are estimated at 10.6405 million, 10.5 million, and 9.3 million tons, respectively. Crushing rates remain high, with soybean oil commercial stocks reaching 1.3888 million tons as of July 20, intensifying inventory pressure. Spot basis levels are under pressure, with downstream buyers mainly purchasing on a needs basis. Overall, continued geopolitical conflicts are pushing crude oil to near two-month highs, supporting the edible oil complex. Meanwhile, persistent drought in the US Midwest, with forecasts of hot, dry weather next week, threatens the pod-setting soybean crop, further underpinning prices. The strong crude oil is also raising logistics costs, suggesting soybean oil will maintain some support, with short-term prices expected to remain firm and volatile.

For palm oil, MPOA data indicated a 6.85% month-on-month increase in crude palm oil production in Malaysia for July 1-20, while SPPOMA data showed a 0.77% decline, warranting close attention to upcoming production data. Monthly export data for the first 20 days of July is mixed, but India's edible oil imports are expected to rise from July to October. India's high dependence on imported edible oils, with domestic vegetable oil inflation above 8%, is driving price increases across various oils and disrupting global trade flows, boosting demand. Additionally, India's upcoming holiday season, during which domestic soybean and rapeseed crushing slows, will increase import demand, supporting export demand from producing regions. Indonesia's President confirmed the B50 policy officially launched in July, and the country has completely halted diesel imports, a positive for forward contracts. Domestically, China imported 224,000 tons of palm oil in June, with total imports of 1.619 million tons for January-June. Mysteel data shows one new cargo booked this week (for November shipment), but with many previous shipments arriving, commercial palm oil stocks in key regions stood at 802,400 tons as of July 17, indicating ample supply. Overall, the strong crude oil is boosting demand expectations for palm oil as a biodiesel feedstock, and concerns over El Niño's impact on production are providing strong support for forward months. Palm oil is expected to maintain a firm trend in the short term, driven by crude oil and weather uncertainties.

For rapeseed oil, Agriculture and Agri-Food Canada's July supply and demand report significantly raised its 2026/27 canola production forecast to 21 million tons (from 19.2 million tons in June), capping upside potential. However, poor weather in parts of the Canadian Prairies is creating uncertainty about canola yield potential, fueling market concerns about a production downgrade. The strong crude oil rally, along with gains in CBOT soybean oil, European rapeseed, and Malaysian palm oil, is providing additional support. As of July 24, the ICE canola November contract closed at 824.9 Canadian dollars per ton, a three-year high, sharply increasing the cost of imported Canadian canola and leading to deep crushing losses. The Canadian Grain Commission reported that weekly canola exports increased to 305,100 tons as of July 20. From August 10, 2025, to July 20, 2026, total Canadian canola exports reached 11.531 million tons, easing selling pressure going forward. Domestically, China imported 652,000 tons of rapeseed in June, with total imports of 1.88 million tons for January-June. Rapeseed oil imports in June were 163,000 tons, with cumulative imports of 1.13 million tons. However, due to a temporary tightness in rapeseed arrivals and low domestic rapeseed oil stocks, the spot basis remains at a high premium. Given the crushing losses, mills are less willing to purchase Canadian canola, and the market is currently focused on the profitability of Australian canola imports and potential cargo bookings. In the short term, rapeseed oil is expected to trade in a wide range at elevated levels, supported by low stocks and a high basis, making it relatively strong among the three major oils.

Strategy

Neutral

Risks

None