Biodiesel back in spotlight as Middle East war lifts CPO prices — analysts
10/03/2026 (The Edge Malaysia), Kuala Lumpur - The surge in crude palm oil (CPO) prices has reignited the appeal of biodiesel amid escalating geopolitical tensions in the Middle East, which have sent crude oil prices surging past US$100 (RM392.70) per barrel, according to analysts.
Analysts noted stronger crude oil prices tend to support palm oil prices through improved biodiesel economics, as higher diesel prices enhance the attractiveness of biodiesel blending.
This could accelerate Indonesia’s policy momentum towards B50 implementation, tightening palm oil availability and providing upside support to CPO prices. Indonesia is the world's largest palm oil producer.
"At the same time, rising freight costs could improve palm oil’s relative competitiveness against other vegetable oils, particularly soybean oil shipments from the US and South America, which involve longer shipping distances to key Asian consuming markets," said TA Securities in a note on Monday.
Meanwhile, Hong Leong Investment Bank, in a note on Tuesday, said CPO prices have surged by about 10% to RM4,592 per tonne since last week.
"While it remains unclear how long geopolitical tensions will persist — and thus the sustainability of the CPO price rally — the current surge in CPO prices should support near-term earnings for planters, particularly upstream players, given their high operating leverage to CPO prices.
"We take comfort that most companies under our coverage have already locked in their fertiliser requirements for the current financial year," said the research house.
Separately, MBSB Research noted that a firmer gasoil market could narrow the Palm Oil-Gas Oil (POGO) spread and potentially accelerate policy momentum towards a B50 mandate.
"Scenario-wise, this contrasts with the prior Russia-Ukraine conditions, where the impact on CPO was more immediate, given CPO served as a direct substitute for sunflower oil (SFO) following disruptions to Ukraine’s sunflower harvest and export flows," said the research house.
MBSB noted that over the past five years, the POGO spread has mostly remained in premium territory, indicating palm oil traded above gasoil for much of the period.
"This largely reflected the long lack of strong Brent-driven support, leaving PO (palm oil) prices a numerator relative to gasoil spread.
"Discount phases were brief, mainly mid-2022 to early 2025 (+US$50-200/tonne), which helped Indonesia roll out B30 and later B40 mandates as biodiesel subsidy costs eased," it added.
As such, MBSB said with the recent US-Iran conflict escalation, any sustained rise in Brent crude could provide support to gasoil prices, given their strong correlation.
"We estimate gasoil prices to remain above US$95/bbl this year, about 7.3% year-on-year higher versus the 2025 average of US$88.5/bbl. A firmer gasoil market would narrow the POGO spread, potentially shifting gasoil to trade at a premium to palm oil."
MBSB kept its average CPO price assumption for 2026 at RM4,200 per tonne.
Top picks across the research houses include SD Guthrie Bhd (KL:SDG) and Hap Seng Plantations Holdings Bhd (KL:HSPLANT), both seen as well positioned to benefit from higher CPO prices due to strong upstream leverage and relatively secure fertiliser procurement.