KUALA LUMPUR: Malaysian palm oil futures rose more than 1% on Monday, as top producer Indonesia moved ahead with plans to test biofuel with higher palm content, while forecasts of weak output in the world’s second-largest producer also lent support.

The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange gained 78 ringgit, or 1.57%, to 5,034 ringgit ($1,203.73) a tonne.

Indonesia’s energy ministry plans to begin road tests for a biodiesel programme using 40% palm-based bio-content (B40) in February, a senior government official said.

“This news has supported the bullish sentiments in palm oil with a lot of rumours suggesting Indonesia may restrict crude palm oil export,” said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

“In the immediate term, the market remains supported by persistently tight supplies amid prolonged labour shortages and production losses in Malaysia,” Refinitiv Agriculture Research said in a note.

Assessments from a millers’ association showed production in the first half of January was down by 20.9% versus the same period last month, Refinitiv Agriculture Research said.

Weighing on markets, exports from Malaysia fell between 32% and 45% during Jan. 1-15 from the same period in December, cargo surveyors said on Saturday.

Malaysia kept its February export tax for crude palm oil at 8% but lowered the reference price to 4,907.14 ringgit ($1,172.55) from 5,302.01 ringgit in January.

Dalian’s most-active soyoil contract rose 0.6%, while its palm oil contract gained 0.9%. The Chicago Board of Trade was closed for a public holiday.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Bursa Malaysia will be closed on Tuesday for a public holiday.