KUALA LUMPUR, July 20: Malaysian crude palm oil futures ended sharply higher on Thursday, fuelled by a decision by the world's top palm producers -- Malaysia and Indonesia -- to set aside 40 per cent of their annual output for biodiesel.

The announcement, in addition to Malaysia's strong palm oil exports announced by cargo surveyors, helped the benchmark third-month October contract on the Bursa Malaysia Derivatives to close up 3.3 per cent to 1,591 ringgit ($432) a ton.

A statement from the Malaysian commodities ministry said the decision was part of an agreement signed between the two nations which together produce the bulk of the world's palm oil.

Malaysia's edible oil industry says the government had approved 32 manufacturing licences, with annual output capacity of around 3 million tons of biodiesel, from 87 applications.

Exports of Malaysian oil palm products for July 1-20 stood at 713,114 tons, up 8.4 per cent from 658,072 tons shipped between June 1 and 20, cargo surveyor Societe General de Surveillance said.

In the physical palm oil market, buyers were quoting 1,500 ringgit a ton for July shipment and sellers were at 1,510 ringgit. Dealers said trading was done at 1,490 ringgit a ton.—Reuters