SINGAPORE (Reuters) - Malaysian palm oil futures reversed earlier losses to trade 1.5% higher on Friday, supported by stronger rival oils and Indonesia's decision to cut its fossil fuel consumption.
The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange was 1.5% higher at 2,765 ringgit ($663.07) per tonne by midday. The contract fell 0.2% in early trade and was on track for its third straight weekly gain.
"Indonesian government announced an optimistic target to cut its fossil fuel consumption by boosting biodiesel demand drove prices higher," said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.
A senior Indonesian energy ministry official said on Thursday that Indonesia's plan for biodiesel to contain 30% palm-based fuel is expected to reduce fossil diesel fuel consumption by 165,000 barrels per day (bpd). [nL4N2882PZ]
Indonesia, the world's top palm oil producer, aims to start its "B30" programme in January, expanding it from the current mandatory use of 20% bio-content in biodiesel.
Indonesia's B30 programme has sparked palm price rally in recent months due to concern that the top producer will have less palm oil to export.
Also supporting palm prices were costlier rival oils on the Dalian Commodities Exchange. Palm oil is affected by price movements in related oils as they compete for share in the global vegetable oils market.
Dalian's January palm oil contract rose 2.9%, while the soyoil contract edged up 1.1%.
Palm oil may rise into a range of 2,760-2,818 ringgit per tonne, as it has cleared a resistance at 2,713 ringgit, said Reuters analyst Wang Tao.
(Reporting by Fathin Ungku)