SINGAPORE: Malaysian palm oil futures surged to their highest in 20 months on Monday, boosted by expectations of tightening supplies and strong demand led by biodiesel consumption.

The benchmark January palm oil contract on the Bursa Malaysia Derivatives Exchange gained 2.9 per cent to 2,532 ringgit ($610.27) per tonne at closing, highest since March 1, 2018. It ended two sessions of losses.

“The supply scenario is pretty bullish for prices next year,” said one Kuala Lumpur-based trader. “We have the biodiesel story which could lead to higher supplies being diverted to make biodiesel.” Top palm oil industry analysts on Friday raised their price outlook for the edible oil, pointing to reduced production and optimism that Indonesia’s so-called B30 biodiesel programme will help bolster demand.

World’s top palm oil exporter Indonesia aims to have 30pc of the palm-based bio-content in biodiesel next year, up from 20pc presently. Malaysia and Thailand are also expected to expand their biodiesel mandates.

Published in Dawn, November 5th, 2019