SINGAPORE: Malaysian palm oil futures finished more than 3% higher on Monday, in the market’s biggest rise in two months, as a rally in crude oil lifted prices after Saudi Arabia and other OPEC+ producers announced a surprise cut in their output target.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange climbed 124 ringgit, or 3.3%, to 3,885 ringgit ($879.56) a tonne, peaking at 3,919 ringgit, or 4.2% higher, earlier in the session.

“A buying frenzy, fuelled by crude oil, sent palm futures up,” said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.

“As fossil fuel prices rise, the demand and use of palm-biodiesel become more attractive.”

Malaysia said on Sunday it had signed a memorandum of understanding with a China government-backed trade association to enhance palm oil trading and cooperation.

Palm oil hits to 2-week high, tracks crude oil rally

Dalian’s most-active soyoil contract rose 1.4%, while its palm oil contract strengthened 1.7%. Soyoil prices on the Chicago Board of Trade was up 2.0%.

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

Oil prices surged on Monday, their biggest rise in nearly a year, after a surprise announcement by OPEC+ to cut more production jolted markets.

Higher oil prices make palm oil a more attractive option as biodiesel feedstock.