KUALA LUMPUR: Malaysian palm oil futures tumbled more than 4% on Friday to close at their lowest in two months, logging a sharp weekly loss as top producer Indonesia eased export rules to “flush out” and reduce high palm oil inventories.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange reversed early gains to close down 270 ringgit, or 4.35%, at 5,940 ringgit ($1,350.00) a tonne.

Palm plunged nearly 8% this week in its first weekly decline in three, also weighed down by fresh COVID-19 restrictions in parts of Shanghai.

Indonesia raised its maximum export tax for crude palm oil by 44% but cuts in another levy are expected to reduce overall fees to send palm oil products overseas.

As part a scheme to speed up exports, the government will allow exporters that have not joined its bulk cooking oil distribution programme to ship palm oil by paying a $200 per tonne charge on top of the export tax and levy, senior minister Luhut Pandjaitan said.

In second-largest producer Malaysia, end-May inventories shrank 7.37% from April to 1.52 million tonnes as exports surged to a five-month peak, data from the palm oil board (MPOB) showed.

Production fell less than expected, at 1.46 million tonnes, while exports rose to 1.36 million tonnes, according to MPOB data.

Meanwhile, exports during June 1-10 fell 3.4% from the same period in May, independent inspection company AmSpec Agri Malaysia said. Another cargo surveyor Intertek Testing Services estimated shipments during the period rose 6.2%.

Dalian’s most-active soyoil contract fell 0.9%, while its palm oil contract dropped 2.9%. Soyoil prices on the Chicago Board of Trade were down 0.9%.