Palm oil futures jumps by 10 per cent limit as Indonesia restricts exports further

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange hit 7,057 ringgit ($1,685.86) per tonne

Indonesia will increase its mandatory domestic sales of palm oil to 30 per cent of companies’ planned exports from the current 20 per cent, starting Thursday, under a scheme called the Domestic Market Obligation | Photo Credit: Hasnoor Hussain

Malaysian palm oil futures jumped by their 10 per cent daily limit on Wednesday, after top exporter Indonesia decided to restrict its outbound shipments further to control prices at home.

The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange rose as much as 9.99 per cent to 7,057 ringgit ($1,685.86) per tonne, soon after trading resumed following the midday break. It had gained 1.2 per cent in the morning session.

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“The new DMO policy is once again to trigger bullish momentum in BMD CPO futures as the Indonesian palm oil export volume would be further lower,” said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.

Ripple effect

Palm buyers have already been jittery as the war in Ukraine has sent crude oil prices soaring and removed a chunk of Ukrainian sunflower supply to the global market. Oil prices extended their rally on Wednesday as the US ban on Russian oil imports and Britain's plan to phase them out by year-end raised concerns of tighter global supply.

Following the price movements in Malaysia, Dalian's palm oil contract gained 8 per cent, while its most-active soyoil contract rose 4.18 per cent. Soyoil prices on the Chicago Board of Trade were up 2.76 per cent.

Palm and related oils affect each other as they compete for a share in the global vegetable oils market. Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

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Palm oil futures jumps by 10 per cent limit as Indonesia restricts exports further