Palm oil rises on Indonesia biodiesel expectations, traders eye B50 hopes

Palm oil futures in Malaysia on June 16 rose 93 ringgit, or 2.07%, to 4,578 ringgit ($1,126) a tonne on the Bursa Derivatives exchange. Traders tied the rally to expectations that Indonesia will keep pulling more vegetable oil into its biodiesel pool, with the prospect of a higher-blend B50 program adding to near-term buying.

The September contract’s strength also tracked firmer soybean oil, which added a broader vegetable oil bid to palm’s move. Market participants said the combination reinforced a view that palm oil is trading less like a pure food commodity and more like a policy-sensitive energy feedstock, with Indonesian blending decisions able to move prices before any mandate is fully locked in.

Indonesia has already made B40 its current standard, and industry coverage put the 2025 foreign exchange savings from that mandate at Rp 130.2 trillion, or about $7.7 billion. That has helped frame higher blends as an energy-security tool in Jakarta, where officials have been working to reduce gasoil imports and expand domestic biofuel use.

The next step would be B50, which would require 20.1 million kilolitres of palm oil-based biofuel a year, up from 15.6 million kilolitres under B40. President Prabowo Subianto said in Tokyo on March 30 that Indonesia would go ahead with B50 in 2026, while Energy Minister Bahlil Lahadalia said in October 2025 that the government was working to push the blend to 50% next year. A separate industry readout later said the mandatory B50 policy could start on July 1, 2026, though the market is still pricing the possibility rather than a completed rollout.

For producers and traders, the message is straightforward. More palm diverted into fuel tightens the pool available for food and export channels, while shifting relative economics toward soybean oil, tallow and used cooking oil in competing renewable diesel and biodiesel systems. That leaves refiners, importers and feedstock buyers in Asia more exposed to policy headlines, even before a final B50 decision lands.