Supply Balance Keeps Soybean Oil Market Rangebound Despite Strong Demand

The soybean oil market has defied expectations by remaining rangebound despite strong demand and higher prices for related commodities. CME soybean futures have reached three-year highs, while West Texas Intermediate crude oil values hover near or above $100 per barrel. However, nearby soybean oil futures have traded mostly between the mid-60¢ and mid-70¢ per lb range since mid-July.

The main reason for this decoupling is the fundamental balance between supply and demand. The Environmental Protection Agency (EPA) set record-high biomass-based diesel mandates under the Renewable Fuel Standard (RFS) for 2026 and 2027, which led to a surge in imports of feedstocks and vegetable oils. Additionally, imports of finished biodiesel jumped from approximately 39,164 tonnes in January-March to 79,764 tonnes in April-June.

The increased availability of supplies has dampened price gains, despite seasonal downtime at soybean processing plants having a limited effect on soybean oil futures. A trade source noted that 'The soybean oil market is finding a well-defined parameter... Every time we get between 71¢ and 72¢, the market shuts down, and the same thing is true when the price drops between 65¢ and 67¢.' The end user wants to own soybean oil at this level due to the certainty that the RFS program will not go away.

However, the EPA's recent decision to grant compliance exemptions to several small refineries has introduced uncertainty into near-term biofuel demand expectations, keeping soybean oil futures confined to their recent trading range.