Palm-oil prices are on a tear, gaining more than 10% in two months, after Indonesia and Malaysia scrapped export taxes, boosting sales abroad, and as the effects of a first-quarter dry spell hit current production. Benchmark crude palm-oil futures on the Bursa Malaysia Derivatives exchange closed 1.1% higher at 2,262 ringgit a metric ton on Tuesday, after hitting 2,345 ringgit a ton last week, the highest in more than three months. More gains are likely in the medium term, traders said.
Palm oil is used in thousands of products, from biofuels to lipsticks and biscuits.
Indonesia’s new government has made a commitment to phasing out fuel subsidies, a development that is also expected to help prices. Oil World, a trade publication, said in its latest industry report that higher fuel prices in Indonesia will make biodiesel more competitive, adding to consumption of palm oil.