JAKARTA: Malaysian palm oil futures fell on Wednesday after the European Union agreed on a new law to prevent companies from selling into its market commodities linked to deforestation.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange dropped 1.20% to 4,045 ringgit ($918.90) per tonne by midday break, after rising more than 3% in the previous session.

The drop was caused by profit-taking as a sudden spike in prices was overdone, while a late night EU deal to curb its role in deforestation also weighed on prices, a trader in Kuala Lumpur said.

The European Union agreed on Tuesday on a new law to prevent companies from selling into the EU market coffee, beef, soy and other commodities linked to deforestation around the world.

Limiting losses on the benchmark, however, Malaysian ringgit weakened by 0.25% after earlier this week hitting its best level since early May. A weaker ringgit, in which the contract is traded, would make the palm oil more attractive for foreign currency holders.

Dalian’s most active soyoil contract was trading 0.22% lower, while its palm oil contract gained 0.82%. Soyoil prices on the Chicago Board of Trade gained 0.19%.

Palm oil is affected by price movements in related oils, as they compete for a share in the global vegetable oils market.

Palm oil may revisit its Tuesday low of 3,865 ringgit a tonne, Reuters technical analyst Wang Tao said.