Whalesbook
Price and Currency Factors
India's crude sunflower oil imports fell sharply by 51% year-on-year in February 2026, reaching 1.45 lakh tonnes. This decline reflects significant cost pressures for domestic refiners. The average import price of crude sunflower oil jumped 17% to $1,420 per tonne, up from $1,216 a year earlier. Adding to the cost, the Indian rupee weakened by 4.2% against the US dollar over the past year, making dollar-priced oil imports more expensive. The FAO Vegetable Oil Price Index also climbed 3.3% in February 2026, indicating rising prices across the edible oil market.
Supply Chain Disruptions
Global supply chains are facing significant pressure, as conflicts in the Middle East and the Black Sea region disrupt shipping routes and increase freight costs. Tensions near the Red Sea and Suez Canal have reduced the availability of supplies. Russia and Ukraine together typically supply 70-90% of India's sunflower oil needs, making the country highly exposed to disruptions from these regions. These conflicts threaten to delay shipments and raise logistics costs, affecting overall supply. This challenging situation has contributed to a drop in imports during the first four months of the 2025-26 oil year, with sunflower oil imports falling to 9.04 lakh tonnes from 11.2 lakh tonnes in the same period last year.
Seeking Alternative Suppliers
To reduce its reliance on volatile supply regions, India is actively seeking new sources. Discussions are underway with Mercosur nations—Argentina, Brazil, Paraguay, and Uruguay—for potential long-term contracts for soybean and sunflower oil. This strategic shift aims to create a more stable supply chain and help stabilize domestic prices amidst ongoing global uncertainty. Meanwhile, China has increased its vegetable oil purchases from Russia by 16% in the first half of the 2025-2026 agricultural year, becoming Russia's main vegetable oil buyer and surpassing India.
Wider Market Context
Although sunflower oil imports fell, India's total vegetable oil imports grew by 6% in February 2026 to 53.24 lakh tonnes. This included 8.47 lakh tonnes of palm oil and 2.99 lakh tonnes of soybean oil. India's vegetable oil stocks were 18.72 lakh tonnes as of March 1, 2026. Globally, the edible oil market faces tight supply, with limited reserves available to absorb unexpected issues. Higher crude oil prices, fueled by conflicts, are also driving demand for palm oil-based biodiesel, potentially increasing palm oil use in Southeast Asia. The FAO Vegetable Oil Price Index rose 3.3% in February 2026, reaching its highest point since June 2022. Globally, edible oil prices are trending upward due to production issues, biofuel demand, and geopolitical instability. Some analysts note that sunflower oil prices have eased slightly due to increased supplies from Argentina, while palm and soybean oil prices have risen.
Key Risks for India
India relies on imports for over 55% of its edible oil needs, making it vulnerable to price swings and supply shortages. Concentrating supply from geopolitical hotspots like Russia and Ukraine creates significant risk. Even as India seeks diversification through Mercosur, current tensions in the Middle East and Black Sea disruptions are driving up freight and insurance costs. These disruptions add an estimated $200-400 per TEU to Asia-Europe trade routes alone. The Indian rupee's weakness also presents ongoing currency risk for all imported goods. The tight global edible oil market means even small supply interruptions can cause large price increases, as seen with the 17% rise in sunflower oil prices. If conflicts in the Middle East escalate, they could disrupt key shipping lanes like the Strait of Hormuz, potentially leading to a major global oil supply drop and further price hikes for edible oils. India's oilmeal exports, important for its trade balance, also face risks if logistics worsen, particularly for shipments to Southeast Asia and the Middle East, which make up nearly 20% of its oilmeal exports.
Outlook
Prices for India's edible oils are expected to remain high in 2026, possibly increasing, due to the country's reliance on imports and unpredictable global demand. Supply challenges, including high freight costs and geopolitical risks, are likely to keep edible oil prices elevated. India's success in diversifying suppliers, particularly with Mercosur nations, will be key to achieving long-term price stability and reducing dependence on traditional, volatile sources. The global fats and oils market is forecast to grow significantly by 2036, but price stability will depend on easing geopolitical and logistical challenges.