B50 mandate in Indonesia seen lifting CPO demand, with further upside from oil price risks

Indonesia’s planned rollout of a 50% biodiesel blend (B50) from July is expected to boost crude palm oil (CPO) demand by about 1.5 million tonnes per year, according to a research note cited by Business Today.

RHB Investment Bank said the policy would provide additional support to domestic palm oil consumption as the blending ratio is raised from the current B40 level, although implementation may be phased.

The research house noted that technical trials for B50 are still ongoing, with road tests scheduled for June and train tests in August, indicating a gradual rollout to ensure operational readiness.

Beyond demand growth, analysts flagged potential changes to biodiesel pricing mechanisms and export levies, particularly as methanol prices have surged more than 50% since the start of the Middle East conflict.

Read also : B50 biodiesel road tests show positive initial results

RHB maintained a neutral outlook on the plantation sector but adopted a tactically positive stance, citing improving fundamentals driven by policy support and commodity price movements.

The report assumes the Middle East conflict will ease within four to six weeks, allowing crude palm oil prices to remain at around RM4,250 per tonne in 2026.

However, the bank warned that a prolonged conflict could push crude oil prices above $100 per barrel or even $150 per barrel, which would likely lift palm oil prices further and benefit plantation companies, as earnings are more sensitive to price increases than cost pressures.

Editing by Alexander Ginting