Rapeseed oil surges to YTD highs amid delivery squeeze and rally across edible oils

Last Thursday August 13, 2026, the ZCE OI2609 contract broke out of its previous Yuan 10,000-10,200/tonne trading range and has since extended gains, surpassing the June 4 high of Yuan 10,416/tonne and then the Yuan 10,700/tonne level. As of August 20, the benchmark OI2609 contract settled at Yuan 10,756/tonne, up Yuan 533/tonne, or 5.31%, week-on-week.

The rally reflects a confluence of bullish factors: (1) cost support from firm overseas rapeseed prices; (2) tight physical rapeseed oil supply in the domestic spot market, fueling short-covering/squeeze sentiment; (3) bullish U.S. soybean crop tour data that lifted soybean futures and spilled over to the broader vegetable oil complex; and (4) persistent strength in palm oil's far-month outlook.

Strong Canadian rapeseed demand has pushed ICE canola futures higher, underpinning domestic prices from the cost side. As of August 19, the ICE Canola November contract closed at CA $819.9/tonne, up CA $34.95/tonne or 3.14% month-on-month.

On the domestic front, earlier slow rapeseed arrivals and subdued crusher runs, where coastal operating rates were below 30%, have kept supply tight. According to Mysteel, in the 33rd week of 2026, rapeseed crush volumes at major coastal plants totaled 109,900 tonnes, with a weekly operating rate of 29.29%.

Rapeseed oil inventories have also been at historic lows. As of August 14, national stocks stood at 512,000 tonnes, down 372,500 tonnes or 42.11% year-on-year. The combination of ultra-low operating rates and lean inventories has squeezed spot availability, with crushers rationing pickups and largely execute previous contracts, with some still delivering against June–July commitments.

State reserve procurement has further reduced free-floating rapeseed oil supply. With the September contract approaching expiry and deliverable standard warehouse receipts scarce, short-position holders face mounting difficulty in covering and securing delivery-ready cargo, rapidly escalating long-side squeeze dynamics, a key catalyst behind the break to new highs.

The U.S. soybean crop tour reinforced bullish sentiment. Pro Farmer's second-day survey showed 3x3-ft pod counts averaging 1,140.75 in Indiana (vs. 1,282.50 last year) and 1,093.50 in Nebraska (vs. 1,248.10). With the first three days of data all trailing year-ago levels, concerns over yield potential intensified, pushing CBOT soybeans above 1,200 ¢/bu and driving domestic soybean oil and meal futures higher, with spillover effects across the vegetable oil space.

Palm oil's deferred contracts continue to price in bullish fundamentals. Notably, the far-month May contract has remained consistently strong, supported by El Niño-driven production cut expectations and demand from Indonesia's B50 biodiesel mandate. With a solid floor and considerable upside, palm oil is poised to stay firm as long as output concerns and B50 policy momentum persist, in turn lifting other vegetable oils.

Near-term, domestic rapeseed oil is likely to trade in a firm, range-bound fashion, underpinned by spot tightness, approaching delivery, and strength in peer oil markets. However, with prices at historically elevated levels, downside risks are non-negligible. A sharp correction could materialize if deliverable receipts in nearby contracts increase notably.

For far-month contracts, while current rapeseed import crush margins are unattractive, rapeseed arrivals are expected to pick up from September to October (estimated at 7–8 vessels per month), pointing to relatively ample Q4 supply. Still, the actual turning point from destocking to restocking will require confirmation as arrivals materialize and crush rates recover.

Going forward, close tracking of rapeseed arrival schedules and crusher operational status is warranted. Meanwhile, monitoring the ZCE OI2609-2701 and OI2611-2701 spread behavior can offer clues: concurrent widening in both spreads would suggest that current high prices are driven not merely by near-term delivery pressures but potentially by deeper supply-demand imbalances in rapeseed oil.