(May 6): Soybean oil contracts fell from their highest in three-and-a-half years, following a slump in crude after US President Donald Trump said he would pause US-led efforts to guide ships through the Strait of Hormuz.
Trump cited “great progress” toward a peace deal between Washington and Tehran and confirmed that there would be a halt on the two-day-old push to escort ships through the important trade route.
Crude oil fell on the prospect of a resolution to the crisis in the Middle East, with Brent dropping for a second day and trading near US$108 a barrel. Soybean oil, a key biofuel input, tends to track crude prices closely and the recent war-driven spike in oil and gas costs has boosted demand for alternative energy sources.
After hitting the highest level since November 2022 on Tuesday, most-active soybean oil futures declined by as much as 0.9% on Wednesday.
However, strong global demand for biofuels meant that soy oil didn’t see the same magnitude of fall as crude, said Joe Davis, a director at brokerage Futures International in Chicago. Brent futures dropped as much as 2.1% before trimming some losses.
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“Vegoils globally are bullish,” said Davis, highlighting robust demand in the US, where higher biofuel quotas have been introduced to boost domestic use. He said soon after soybean oil prices fell, buyers immediately began to swoop in to buy the dip, a sign of bullish market sentiment.
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