The quality of biodiesel blends and its compatibility with fuel tank materials needs to be investigated before any higher biodiesel blends are introduced. This is to ensure that there are no leaching of any undesired materials which may degrade or oxidise the fuel and ultimately cause failure to vehicles. This article discusses the oxidation stability of palm biodiesel and its blends with petroleum diesel, i.e. B7, B10 and B15. The effect of palm biodiesel and its blends on terne sheet were examined using cup test. Terne sheet, a material commonly used to fabricate automotive fuel tanks, has been previously identified as incompatible with biodiesel. Nevertheless, the findings showed that palm biodiesel blends would not cause any corrosion or incompatibility with terne sheet. The terne plating was maintained at approximately 40 g m-2 after exposure to palm biodiesel and its blends at 80°C for 1000 hr. Scanning electron microscopy (SEM) morphologies have shown no signs of corrosion or pitting on the surface of the terne plating. No leaching of heavy metals was found on the fuel samples. Hence, the terne sheet was found compatible with palm biodiesel blends as long as the test fuels in use were of good quality.