KUALA LUMPUR: Malaysian palm oil futures jumped to a near five-week closing high in the first trading session of the year, underpinned by production slowdown and tighter Indonesian supply.

The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange gained 81 ringgit, or 1.94%, to 4,255 ringgit ($966.61) a tonne on Tuesday.

The contract averaged 4,190 ringgit ($952.27) in 2022, and logged its first annual decline in four years.

“Market is higher banking on lower first quarter output and a decline in stocks,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

Traders said Southern Peninsular Palm Oil Millers Association estimated production in December fell 1.68% from the month before.

Indonesian officials said on Friday the country would tighten export rules for palm oil from Jan. 1 by allowing fewer shipments overseas for every tonne of oil sold domestically to ensure sufficient and affordable cooking oil supply at home.

India has extended a policy to allow imports of vegetable oils such as palm oil, soyoil and sunflower oil at lower taxes by a year until March 2024, the government said last week.