Jakarta. Palm oil prices rose on Tuesday as tightening supply conditions and stronger demand prospects lifted market sentiment, though gains were capped by currency strength and policy uncertainty in top producer Indonesia.

Benchmark palm oil climbed to 4,085 ringgit ($1,007.4) per tonne on Wednesday, up 0.54% from the previous day, according to tradingeconomics.com. Prices are up 1.97% over the past month but remain 6.35% lower than a year earlier.

Malaysian palm oil futures advanced nearly 1% to around 4,130 ringgit per tonne, extending gains from the prior session and reaching a five-week high. The rally mirrored firmer edible oil prices on China’s Dalian exchange and in Chicago.

Supply data added momentum. Malaysia’s industry regulator reported December production fell 5.5% from November to 1.83 million tonnes, tightening availability ahead of seasonal demand tied to the Lunar New Year and Ramadan. Shipments rose 8.5% month-on-month to 1.32 million tonnes, reversing earlier weakness. Separate estimates from cargo surveyors showed exports of palm oil products for Jan. 1–10 jumped between 17.7% and 29.2% from December levels.

Demand signals were also supportive. Buying interest improved in India, the world’s largest palm oil importer, where purchases are expected to rebound in January after falling to an eight-month low in December. Lower inventories and restocking ahead of festivals are driving renewed orders, traders said.

Still, upside was tempered by a stronger Malaysian ringgit, which can make exports less competitive, and caution ahead of fresh economic data from China due later this week. Markets are also weighing uncertainty over Indonesia’s biodiesel policy trajectory, a key driver of global palm oil demand.

Indonesia, the world’s biggest palm oil producer, plans to maintain its current B40 biodiesel mandate this year, while keeping a higher B50 blend under review, Coordinating Economic Affairs Minister Airlangga Hartarto said on Tuesday. The B40 policy requires diesel fuel to contain 40% palm oil-based biodiesel.

“This year, the president’s direction is to keep B40,” Airlangga said after an event in Jakarta, referring to President Prabowo Subianto. “For B50, studies must continue on an ongoing basis.”

Airlangga said moving to a 50% blend would depend on price dynamics, including the spread between fuel oil, conventional diesel and palm oil prices in domestic and international markets. Technical studies and automotive trials will continue, he added, while the government monitors readiness across the supply chain.

“The B50 policy is not cancelled,” Airlangga said. “The studies and vehicle tests are ongoing. Implementation depends on price scenarios and industry preparedness from upstream to downstream.”

Indonesia has steadily expanded its biodiesel program since its launch in 2016, progressing from B10 to the current B40 mandate. The policy has significantly reduced diesel imports, which officials say have fallen to about 4.9 million barrels per year, roughly 10% of national demand.

B40 biodiesel consists of 60% fossil diesel and 40% palm oil-based fuel. Any move to B50 would further increase domestic consumption of palm oil, potentially tightening global supplies but also raising fiscal and pricing considerations.