JAKARTA: Malaysian palm oil futures fell on Wednesday after the European Union agreed on a new law to prevent companies from selling into its market commodities linked to deforestation.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange dropped 3.05% to 3,969 ringgit ($903.07) per tonne by afternoon closing, nearly erasing all of its gains from a day earlier.

A late night EU deal to curb commodities linked to deforestation as well as profit-taking following a sudden spike in prices led to the drop on Wednesday, a trader in Kuala Lumpur said.

The EU agreed on Tuesday to prevent companies from selling into its market coffee, beef, soy and some other commodities.

Weakness in rival oils also added to the pressure on palm oil prices.

Palm oil drops on weakness in rival oils

Dalian’s most active soyoil contract posted a 0.50% loss, while its palm oil contract dropped 0.69% after rising as much as 1.90% earlier in the session. Soyoil prices on the Chicago Board of Trade gained 0.18%.

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

Palm oil may revisit its Tuesday low of 3,865 ringgit a tonne, Reuters technical analyst Wang Tao said.