The higher biodiesel blending mandate will soak up more supplies of palm oil, used as feedstock to make biodiesel and reduce stockpiles in Malaysia, the world’s second largest producer of the edible oil.

“The price gap between Brent oil and crude palm oil is narrowing, thus making higher blending of biodiesel… more viable to be implemented in due course,” said Shamsul Iskandar Mohd Akin, deputy minister of primary industries.

The ministry would announce the implementation of the programme by end of this year subject to Cabinet approval, he said in a statement.

Malaysia’s implementation of the higher palm oil percentages was delayed twice in 2016 when oil prices were low and made conventional diesel more price competitive than biodiesel.

Benchmark palm oil’s premium over gas oil narrowed over the past year, turning into a discount in April which has since rapidly widened, making biodiesel production more viable.

The discount reached US$129 per tonne last week, its widest since December 2014, and was last at US$91 a tonne on Wednesday evening.

Prices of palm oil, used to produce the bio components of biodiesel, have shed nearly 12% since the start of the year partly on weak demand. Benchmark palm oil prices last closed 1.8% higher at RM2,211 (US$544.98) a tonne yesterday evening.