SINGAPORE: Malaysian palm oil recovered losses and jumped to a more than eight month-high on Tuesday, aided by a weaker ringgit, gains in U.S. soyoil and positive consumption outlook from Malaysia and Indonesia's biofuels push.
The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange closed to rise 1.4% to 2,317 ringgit ($553.38) per tonne, the highest since Feb. 7.
Palm prices fell as low as 2,263 ringgit earlier in the session as worries over export demand mounted following news that India's top vegetable body asked its members to stop buying the edible oil from the Southeast Asian country.
The Solvent Extractors' Association of India (SEAI) made the unprecedented call on Monday aimed at helping New Delhi punish Malaysia for criticising India over its policy towards Kashmir.
But the Malaysian ringgit last fell 0.2% on Tuesday, making the edible oil cheaper for holders of foreign currency, which helped buoy prices while U.S. soyoil futures on the Chicago Board of Trade jumped 0.9%.
Malaysia also said earlier in the day that implementation of biofuels in Malaysia and Indonesia will increase consumption of palm oil up to 1.3 million tonnes and 10 million tonnes per year respectively, adding that the two countries will challenge a European Union law that will limit palm oil use in biofuels.
"Market opened in pressure to SEAI's statement but then readjusted to the biofuels allocation story," Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker, said of the "surprise" jump.
But it is uncertain if the "sudden" recovery can be sustained, a Kuala Lumpur-based analyst told Reuters.
India was Malaysia's third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit.
Vegetable oil contributed 2.8% of Malaysia's gross domestic product last year and 4.5% to total exports.
Some Indian traders said refiners had already stopped buying Malaysian palm oil for shipment in November and December, fearing higher import taxes or other measures.
Elsewhere, Dalian's January palm oil contract fell 0.3%, while the January soyoil contract dropped 0.4%. Palm oil is affected by price movements in related oils as they compete for share in the global vegetable oils market. - Reuters
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