Energy Weakness Triggers Profit-Taking in Vegetable Oils

Selling in the energy complex triggered weakness in vegetable oil markets on Tuesday. Rainfall in key Argentine growing areas also contributed to the bearish tone. However, both markets found support at the five-day exponential moving average, suggesting the selling may be short-lived. That said, uncertainty about the European vaccine roll-out and a set of disappointing U.S. economic indicators (retail sales, industrial production, and homebuilder confidence) could extend weakness in energy prices and, by extension, potentially in vegetable oil futures. Still, world vegetable oil fundamentals remain bullish and domestic demand in the U.S. remains robust, suggesting the potential for the spread between soybean oil and heating oil futures to continue to rally.

The spread between the May soybean oil and palm oil contracts…