【Relaxed Oil Restaurant】The hype over the raw soy policy has temporarily subsided, and oil prices have surged then retreated.

（Source: CFC Commodity Strategy Research）

Author | CITIC Jianqiao Futures Research and Development Department Shi Lihong

Report completion time | 2026-04-05

Important notice: The views and information in this report are for the reference of futures traders that comply with the CSRC suitability management regulations only. Because this platform is temporarily unable to set access restrictions, if you are not a trader that complies with the regulations, to control trading risks, please do not click to view or use any information in this report. We sincerely apologize for any inconvenience this may cause you, and thank you for your understanding and cooperation!

With the hype around U.S. and Indonesian biofuel policies coming to a temporary end, overall oilseeds and fats this week rebounded upward and then fell back, showing clear upward pressure. At the end of March, the U.S. biofuel blending policy finally arrived, and the final plan was basically consistent with market expectations. Bulls exiting the market caused U.S. soybean oil to exhaust its good news in the short term, failing to provide additional upside momentum for fats and oils. In the first half of this week, the market was eager to trade Indonesia’s B50, with Indonesia planning to implement the B50 program on July 1, which would push palm oil strongly to stand above the 10000 level. However, the technical and capacity constraints of Indonesia’s B50 have not yet been resolved, and doubts have arisen in the market about whether its policy can be implemented as scheduled. Meanwhile, expectations of a easing of the Middle East situation led crude oil to fall back as well, weakening the foundation for Indonesia to accelerate B50. This has dragged down fats and oils at elevated levels, with palm oil leading the decline. However, the Middle East situation’s repeated ups and downs have significantly increased near-term volatility in fats and oils at high levels. As the latest Middle East situation tightens again, sentiment in the fats and oils market may heat up once more, potentially causing it to continue running at high levels.

I. The U.S. biofuel blending policy lands; U.S. soybean oil temporarily exhausts its favorable news

On March 27, the EPA’s final rule on the 2026-2027 biofuel blending mandate arrived late. In this plan, the EPA delays the two-year implementation of the import RIN half-off policy, but still sets the blending mandate for biomass-based biodiesel for the next two years in the form of RINs; for 2026 and 2027, respectively, it is 8.86 billion and 8.95 billion RINs. Based on coefficients of 1.64 and 1.57, this is converted to 5.4 billion gallons and 5.7 billion gallons. In addition, the EPA reallocates 70% exemptions for small refineries from 2023-2025 back to large refineries. Overall, this blending requirement increases sharply compared with 2025, laying the foundation for a long-term growth in U.S. biofuel feedstock demand and a strong-price pattern for U.S. soybean oil. But in the short term, the final rule is basically in line with earlier market expectations, which led to the U.S. soybean oil’s upside rally exhausting further as soon as the favorable news was out. However, the average RIN coefficients of 1.64 and 1.57 are only EPA estimates; actual conditions may differ to some extent. This will become a source of uncertainty regarding the real U.S. biofuel blending and production volumes.

With the blending mandate plus the 70% small-refinery exemption, the U.S. biomass-based biodiesel blending obligations for 2026-2027 rise to 9.07 billion and 9.2 billion RINs, and combined with demand to fill needs for other advanced biofuels and conventional biofuels, the blending demand for biofuels will grow further. Although there are still many surplus RINs available for use, we expect U.S. renewable diesel plants may take advantage of the RIN coefficient reduction window before it is lowered in 2027. U.S. biomass-based biodiesel production in 2026 is expected to reach 9 billion RINs or even higher. Converted using the 1.64 coefficient, this is approximately 5.5 billion gallons. It corresponds to oilseed and fat feedstock demand of nearly 20 million metric tons, which will increase U.S. soybean oil feedstock demand to over 7 million metric tons. For 2027, U.S. biofuel production and oilseed and fat feedstock demand are also expected to further rise to over 20 million metric tons, pushing U.S. soybean oil feedstock demand to above 8 million metric tons. However, whether the RIN conversion coefficient is high or low affects the production requirements for U.S. biofuels and the oilseed and fat feedstock demand. Moreover, the feedstock blending situation for different inputs also needs to be comprehensively assessed based on subsidies and price spreads; the situation still needs continuous adjustment according to actual conditions.

Although real-time profit tracking and calculations show that the current diesel and D4 RINs prices can support the U.S. soybean oil break-even point rising to around 80 cents per pound, this implies that current U.S. biofuel production and blending profits are substantial. However, from the perspective of market themes, the U.S. biofuel blending policy that has landed is not far off from expectations. Currently, U.S. soybean oil has temporarily exhausted its favorable news; the subsequent price movement will be influenced by whether the expectations for demand growth are realized.

II. Whether Indonesia’s B50 can be implemented as scheduled still involves substantial uncertainty

Besides the U.S. biofuel blending policy landing and causing the U.S. soybean oil to temporarily exhaust its favorable news, this week the Indonesian Coordinating Ministry for Economic Affairs Minister stated that B50 would be implemented starting July 1, pushing the biofuel policy-driven speculation to another high. But after that, as more and more doubts emerged about whether Indonesia can implement B50 as scheduled, the palm oil futures curve also showed signs of weak upward momentum.

On March 30, during a state visit, the Indonesian president said that B50 would continue to be promoted this year, which triggered a jump in palm oil late in Monday’s trading. On Tuesday evening, the Minister of Indonesia’s Coordinating Ministry for Economic Affairs stated that B50 would be implemented starting July 1. Market sentiment for palm oil was further ignited, and palm oil strongly broke above the 10000 level. However, with crude oil prices surging sharply due to recent Middle East conflict, the POGO price spread fell significantly, easing the pressure on capital outflows from Indonesia’s palm oil biodiesel subsidy fund. In addition to expecting growth in palm oil-based biodiesel commercial blending demand, the market also developed some expectations for Indonesia’s accelerating of B50 in the second half of the year, especially after March 11, when Indonesia’s Deputy Minister of Energy and Mineral Resources said that tests for the B50 route had been accelerated and that the promotion of the B50 plan might resume by mid-year. This means that the current palm oil price already incorporates a portion of the expected premium for Indonesia’s B50. While the expectations may still continue to drive prices upward after being confirmed by official sources, we believe the biggest risk of chasing the rally lies in the high uncertainty about whether the policy can be implemented as scheduled.

In multiple prior practices, Indonesia’s statements and actions regarding biofuel policy have often been inconsistent. Until the corresponding supporting policies are implemented on the ground, the uncertainty of policy implementation cannot be ignored. Taking the recent B40 as an example: this plan was initially proposed in early 2020, but due to the pandemic and the surge in palm oil prices, it was shelved for a long time. After Indonesia successfully implemented B35 in August 2023 and conditions were met to continue accelerating B40 in all aspects, the Indonesian government restarted the B40 plan. It was initially set for mandatory implementation on January 1, 2025, but due to issues with supporting facilities, its official implementation only began in March.

Following the implementation path of B40: after the B50 plan was proposed last year, it was shelved because the price spread between palm oil and diesel remained high in early this year, and it was restarted again recently due to the surge in oil prices. Although we do not question Indonesia’s determination to continue accelerating B50 in the context of energy transition and geopolitical restructuring, considering that the B50 route testing has not yet been completed, adjustments on the production side and supporting facilities also need time, and biofuel plants intended to meet the increased capacity demand for B50 have not yet been commissioned, with only three months of preparation time being very rushed, it is still difficult to rule out the possibility that the Indonesian government may delay the B50 implementation time later or set a transition period lasting several months.

The recent positive statements and actions by Indonesian officials to accelerate B50 look more like a desperate move in the face of an energy crisis. From the conditions for B50 implementation, although subsidy issues have been improved relatively well due to the sharp surge in crude oil and diesel prices, the problems that the B50 route testing has not passed and insufficient biofuel production capacity have not yet been resolved. Although Trump is still exerting maximum pressure on Iran and may even dispatch ground forces, Middle East energy supply is not without room for maneuver. According to market monitoring, as more negotiations between countries and Iran have been reached, more ships are crossing the Strait of Hormuz. The average number of transit ships over the past week has reached the highest level since the outbreak of the Middle East conflict at the end of February. If Southeast Asia’s supply issues for crude oil and diesel are alleviated, Indonesia’s hasty accelerating of B50 may slow down accordingly, bringing uncertainty to the policy of implementing B50 on July 1.

Overall, with the U.S. biofuel blending policy landing, U.S. soybean oil has temporarily exhausted its favorable news, and Indonesia’s B50 faces many market doubts after a brief round of speculation. Bringing an end to biofuel policy-driven speculation will put upward pressure on fats and oils—led by palm oil—under some drag. In the short term, focus on palm oil 09 around 10000 and soybean oil 09 around 8800. We expect that the price volatility of palm oil will be significantly higher than that of soybean oil. However, the repeated Middle East situation has significantly increased high-level volatility in recent fats and oils. As the latest Middle East situation tightens again, sentiment in the fats and oils market may heat up again, leading it to continue operating at high levels, and there is still unlikely to be much downside room for fats and oils.

Researcher: Shi Lihong

Futures trading consulting practitioner information: Z0014570

Futures trading consulting business qualification: CSRC license [2011] 1461号

Important statement

The views and information in this report are for the reference of futures traders only who comply with the CSRC suitability management regulations. Any actions taken based on this shall be at your own risk and responsibility. CITIC Jianqiao Futures Co., Ltd. (hereinafter referred to as “CITIC Jianqiao”) will not treat subscribers as its clients merely by any act of subscription or receiving this report.

If the contents published in this report involve or fall under a series of interpretations, then if traders use the materials contained herein, they may misunderstand the assumptions, research basis, conclusions, and other content therein due to a lack of understanding of the complete contents. Traders are reminded to refer to the complete series of reports already published by CITIC Jianqiao, read carefully the various statements, data sources, and risk warnings attached to them, pay attention to the key assumption conditions under which the relevant analysis and forecasts can hold, focus on the target prices and time horizons of the research basis and research conclusions, and accurately understand the logic of the research.

CITIC Jianqiao makes no express or implied guarantees regarding the accuracy, reliability, timeliness, and completeness of the materials contained in this report. The information and opinions in this report only represent CITIC Jianqiao’s judgment at the time of publication. Related research views may be changed based on subsequent reports issued by CITIC Jianqiao, without issuing a notice.

CITIC Jianqiao’s sales staff, trading staff, and other professionals may, based on different assumptions and standards, and using different analytical methods, make market commentaries and/or views orally or in writing that differ from the opinions in this report. The contents published in this report are not brokerage or decision-making services, and under no circumstances do they constitute any trading recommendation to traders who receive this report. Traders should fully understand various trading risks and carefully consider whether the contents published in this report meet their own specific circumstances, and make their own trading decisions independently, taking full responsibility for the trading risks. Any decisions made by traders based on the contents of this report are unrelated to CITIC Jianqiao or the relevant authors.

The contents published in this report are solely owned by CITIC Jianqiao. Without CITIC Jianqiao’s prior written permission, no institution and/or individual may, in any form, reprint, copy, or publish this report. If citations, forwarding, etc. are needed, the source must be noted as “CITIC Jianqiao Futures,” and no additions, deletions, or modifications may be made to this report. Nor may any institution, individual, or operating media platform that has not been authorized in writing by CITIC Jianqiao receive, reprint, copy, or cite all or part of the contents of this report. All rights reserved; violators will be held liable.

National unified customer service hotline: 400-8877-780

Website: www.cfc108.com

A massive amount of information and precise interpretations—available in the Sina Finance app