A surprise announcement by members of the OPEC group of oil producers to reduce output led to a strong reaction in crude oil prices and also passed on to vegetable oil prices, Lipsa reported.
Brent crude prices rose after Saudi Arabia, Iraq and several Gulf states said they were cutting output by more than 1M barrels/day, the BBC reported on 3 April.
In addition, Russia said it would extend its reduction of 500,000 barrels/day until the end of the year.
OPEC accounts for some 40% of the world’s crude oil production.
The price of Brent crude oil was trading close to US$85/ barrel after jumping by almost 6%, at the time of the BBC report.
A Saudi energy ministry official said the move was “a precautionary measure aimed at supporting the stability of the oil market”, the official Saudi Press Agency was quoted as saying by the BBC.
The value of vegetable oils tracks Brent crude prices because vegetable oils can be blended with biodiesel. When crude oil prices rise, vegetable oils can be blended in fossil fuel as a substitute, raising their prices or affecting their supply. Fossil fuel prices therefore provide the floor under which vegetable oil prices will not fall below.
