SINGAPORE: Malaysian palm oil futures rose nearly 3% on Monday and touched a two-week high, as a rally in crude oil lifted prices.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange gained 97 ringgit, or 2.6%, to 3,858 ringgit ($872.85) a tonne by the midday break, recovering from a brief fall late last week.

“A buying frenzy, fuelled by crude oil, sent palm futures up,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

“As fossil fuel prices rise, the demand and use of palm-biodiesel become more attractive,” he added. Malaysia said on Sunday it has signed a memorandum of understanding with a China government-backed trade association to enhance palm oil trading and cooperation.

Dalian’s most-active soyoil contract advanced 1.7%, while its palm oil contract gained 1.9%.

Soyoil prices on the Chicago Board of Trade was up 1.6%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Oil prices surged on Monday, jolted by a surprise announcement by OPEC+ to cut production further in what top producer Saudi Arabia called a precautionary measure to support market stability.

Malaysia, China ink partnership to stabilise palm oil supply chain

Palm oil often takes cues from energy markets, with the growing use of the vegetable oil in making biofuels helping it compete with petroleum products.