Malaysian palm oil futures fell by their most in eight months on Tuesday after the country's prime minister defended his criticism of India even as it halted palm oil imports from the world's second-largest producer following a diplomatic spat.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed down 87 ringgit, or 2.8%, at 3,005 ringgit, logging its second straight day of losses. That was palm oil's largest one-day fall since May 2, 2019.
India, the world's biggest buyer of edible oils, last week restricted imports of refined palm oil and informally instructed traders to stay away from Malaysian palm oil. The move has effectively stopped all purchases from top supplier Malaysia, industry and government sources told Reuters.
In response, Malaysia's Prime Minister Mahathir Mohamad, who had previously accused India of invading Kashmir and criticised its new religion-based citizenship law, indicated on Tuesday that he would continue to speak out against "wrong things" even if it costs his country financially.
India's restriction will result in a quicker build-up of Malaysian Palm Oil Board (MPOB) stockpile when output starts to recover from the second quarter of 2020 and will cap upside in CPO prices as the world looks at MPOB's stockpile as a proxy to the region's overall stockpile, Maybank IB Research said.
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