OREANDA-NEWS. March 24, 2015. Malaysian palm oil futures rose on Monday as Indonesia's plan to impose levies on crude palm exports triggered hasty buying from the top producer, although traders say gains are "unsustainable" as the tropical oil battles with dwindling global demand.

Indonesian officials are preparing new rules for a charge of \\$50 on every tonne of crude palm oil (CPO) shipped at a zero export tax rate, with the funds going to help pay for biodiesel subsidies announced in recent weeks. The measure is pending approval by President Joko Widodo who will return from his overseas trips on March 30.

The key palm grower, which supplies around 52 percent of the world's palm oil, has set its crude palm oil export tax for March at zero, unchanged since October last year.

"This buying is because people want to avoid the \\$50 levy before the bill is signed by Jokowi," said a trader with a foreign commodities brokerage in Kuala Lumpur.

"Once the speculative buying is over, then it will be bad. Who wants to pay so high when there know there's a lot of supply in Indonesia? These are very short-term, unsustainable gains."

The benchmark June contract on the Bursa Malaysia Derivatives had inched up 1.2 percent to 2,186 ringgit (\\$592) a tonne by Monday's close, pausing a losing streak that had dragged prices to their biggest weekly drop since November last week.

Total traded volume stood at 40,932 lots of 25 tonnes, higher than the average 35,000 lots.

Analysts say while the potential tax levy could lower CPO prices in Indonesia and be negative for pure upstream palm oil players in the short term, it could underpin prices if the measure is successful in boosting biodiesel demand.

"This levy could be a medium-term positive for CPO players, if it is successful in boosting biodiesel demand, resulting in stronger CPO prices," said CIMB's Ivy Ng in a note on Monday.

In other markets, oil prices fell further on Monday, with Brent dropping below \\$55 a barrel, after top exporter Saudi Arabia said it would only consider cutting output if other producers outside OPEC did so too.

The US soyoil contract for May was up 0.8 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange rose 0.6 percent.