Going forward, we remain positive on the outlook for oil prices. In September 2009, our oil Research team raised its 2010E-2011E oil price forecasts to US$90/bbl and US$110/bbl, respectively, on higher oil demand projections due to upward revisions to our global GDP forecasts and tangible signs of US/OECD demand stabilization.
Higher oil prices are positive for biodiesel demand and also increase the breakeven at which CPO biodiesel is viable for production outside government mandates (which stipulate a blending requirement irrespective of price). For example, we estimate that at current CPO prices biodiesel is viable if prices stay above US$61/bbl (based on export to Europe). Meanwhile, our 2010E-2011E CPO price assumptions of US$850 and US$950, respectively, imply biodiesel breakeven oil prices of US$75/bbl and US$88/bbl, respectively, (export to Europe), which is conservative relative
to our oil price forecasts of US$90/bbl and US$110/bbl for 2010E-2011E.
(Source: Golman Sachs)