JAKARTA: Malaysian palm oil climbed to its highest level in almost 12 weeks on Wednesday, supported by gains in competing oilseed markets and on expectations the country’s palm oil demand would increase because of a new biodiesel policy, traders said.

Malaysia announced the “B7” mandate on Tuesday, to increase the amount of palm oil in biodiesel from 5 per cent to 7pc from November, as the world’s No. 2 palm grower tries to reduce stockpiles and prop up prices that have fallen nearly 20pc this year.

By Wednesday’s close, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had gained 2.26pc to 2,263 ringgit ($691.84) per tonne, its highest level since Aug. 8. Total traded volume on Wednesday stood at 68,612 lots of 25 tonnes, well above the average of 35,000 lots traded.

Technicals showed palm oil is expected to rise to 2,295 ringgit per tonne, having cleared a resistance at 2,259 ringgit, said Reuters market analyst Wang Tao. Palm oil prices may have bottomed out and will likely trade between 2,100-2,300 ringgit per tonne ($641-$703) in the next few weeks before rising to 2,500 ringgit by March, as output weakens and stocks ease, leading analyst Dorab Mistry said.

Published in Dawn, October 30th , 2014