Malaysian palm oil futures reversed earlier losses to trade over 1% higher on Thursday after Indonesia announced its plan for a biodiesel push to reduce fossil fuel use by 165,000 barrels per day (bpd) and as supply outlook dimmed.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange traded 1.5% higher at 2,726 ringgit ($653.72) per tonne at closing, after falling to as low as 2,645 ringgit earlier in the session. It has declined 3% so far in the week after a near 7% gain in the previous week.
Higher prices towards the end of the session were due to a tight supply outlook and on more details about Indonesia's biodiesel plans, a Kuala Lumpur-based trader told Reuters. Malaysian palm producer FGV Holdings said earlier on Thursday it expects its production of crude palm oil to increase by a marginal 0.5%-1% in 2020.
Also on Thursday, a senior Indonesian energy ministry official said the implementation of the country's plan for biodiesel to contain 30% palm-based fuel is expected to reduce fossil diesel fuel consumption by 165,000 bpd.
Indonesia, the world's top palm oil producer, aims to start its "B30" programme in January, expanding it from the current mandatory use of 20% bio-content in biodiesel. It has sparked a palm price rally in recent months on concerns that the top producer will have less palm oil to export.
Limiting gains, however, was cheaper palm oil on the Dalian Commodities Exchange due to a surge in China's imports of the tropical oil. Dalian's January palm oil contract fell 0.9%, while the soyaoil contract edged up 0.2%.
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