KUALA LUMPUR: Malaysian palm oil futures reversed early gains to fall more than 5% on Friday, posting their deepest weekly plunge since 1986, after top producer Indonesia’s abandonment of volume curbs on exports outweighed news of a higher export levy.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange closed down 304 ringgit, or 5.12%, at 5,632 ringgit ($1,343.83) a tonne.

Palm fell 16% this week, snapping a three-week rally and erasing most of the war risk premium accrued after Russia invaded Ukraine late last month. That was its largest weekly decline since Feb. 28, 1986.

The removal of Indonesia’s export restrictions would lift global palm oil supply, which may in turn curb international crude palm oil prices, analysts at UOB Kay Hian said in a note.

Prices were higher earlier on Friday after news that Indonesia had significantly raised its maximum palm oil export levy to $375 per tonne when the reference price is at least $1,500 a tonne.

“(A) higher Indonesian crude palm oil export levy under the revamped structure means Malaysia will continue to benefit from increased crude palm oil exports,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

The move, part of efforts to control domestic cooking oil prices after previous measures failed to tackle the problem, came a day after Indonesia announced a surprise policy U-turn to remove export volume restrictions on palm oil products.

Better Malaysian export prospects and a recovery in the Dalian market offered some support to the market, Varqa said, but there was some pull-back with production set to rise in March.

Dalian’s soyoil contract rose 0.7%, while its palm oil contract fell 1.5%. Soyoil prices on the Chicago Board of Trade were down 1.5%.