2 Min WatchArticle24 Jul 2023

Are Soybean Oil and Crude Oil Playing a Game of “Tag”?

At a Glance

Soybean oil and other vegetable oils’ prices tend to lead crude oil prices

Vegetable oils leading price movements in crude oil began to be noticeable in 2005

There is little secret that agricultural goods and energy markets are closely related. But could soybean oil actually be a leading indicator of crude oil?

If one looks closely, a fascinating pattern emerges. First, back in late 2006 and early 2007, soybean oil began to rally even as crude oil prices fell. Crude oil later began following soybean oil higher. Soybean oil prices then peaked in January 2008. Crude oil peaked six months later in July 2008.

Soybean oil prices were in free fall in late 2008, hitting bottom in December. They then moved slightly ahead of crude, which reached its low two months later in February 2009.

Soybean oil then led a recovery, which peaked in 2011, several months ahead of crude oil’s peak. From 2011 to 2014, soybean oil prices slid, almost in anticipation of the abrupt collapse of crude oil prices in late 2014 and early 2015. Soybean oil hit bottom in October 2015, crude oil in February 2016.

Since then, many of the peaks and valleys in soybean oil prices have happened ahead of crude, including in 2022 when bean oil peaked in early May and crude oil peaked in late June.

In the past few months, soybean oil prices have been soaring, even as crude has failed to rally. Does this portend a rebound in crude later this year? Time will tell.

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