Malaysian palm oil futures ended off their highest in more than three weeks on Thursday after refiners took advantage of a cheap local tax rate to boost crude palm oil purchases. 

Crude palm oil from No.2 producer Malaysia is currently cheaper than products from top producer Indonesia, thanks to an export tax levied at 4.5 per cent, compared with Indonesia’s 10.5 per cent. 

Malaysian palm oil exports rose by up to 14 per cent in the first 20 days of March, but investors are wary that rising prices could lead to a tax hike in May and weigh on demand. 

Malaysia sets its export tax on crude palm oil each month based on prices. April’s tax rate has been set at 4.5 per cent. 

Investors are also concerned that an import duty hike in India, the world’s biggest edible oil buyer, will crimp future demand, traders said. 

“Although the demand continues to show signs of struggling, the increase in crude palm oil buying by local refineries is suggesting for the most part everything is under control,” said a trader with a local commodities broker in Malaysia.

By market close, the benchmark June contract on the Bursa Malaysia Derivatives Exchange had risen 0.5 per cent to RM2,455 per tonne, coming off an early high of RM2,477, a level unseen since February 25. 

Total traded volume stood at 39,194 lots of 25 tonnes each, higher than the usual 25,000 lots. 

Technical analysis showed Malaysian palm oil was expected to rise to RM2,498 per tonne, said Reuters market analyst Wang Tao. 

Traders say an export duty hike for the crude grade would turn buyers to refined palm products. 

Cargo surveyor data showed that refined palm olein exports almost doubled between March 1 and 20, offsetting weaker crude palm oil shipments and giving a leg up to overall exports. 

The higher exports of palm oil products, alongside seasonally slowing output, would help to further ease inventory levels in Malaysia, which have edged down to 2.44 million tonnes in February from December’s record highs.

In other markets, crude oil was pushed lower on Thursday by fears of further turmoil in the euro zone, as Cyprus scrambled to avoid bankruptcy, and by manufacturing data which showed a deepening downturn in the currency bloc.

In other vegetable oil markets, US soyoil for May delivery rose 0.8 per cent in late Asian trade. The most-active September soybean oil contract on the Dalian Commodities Exchange also closed 0.8 per cent higher.– Reuters

Source : Business Times