KUALA LUMPUR: Malaysian palm oil futures closed nearly 2% down on Tuesday, retreating from a three-week high hit in early trade as technical selling and concern over higher than expected production weighed on prices.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange finished 1.95% down at 2,057 ringgit ($491.58) a tonne for its sharpest daily decline in more than a fortnight. The drop was also palm's first day of losses in six.
"The market declined on technical selling as it was overbought after gaining for five sessions," said one Kuala Lumpur based trader.
Another trader said palm prices were also pressured by concern that May output would be higher than expected. "May's full-month output (versus April) might be flat," the trader said.
Previous expectations were for output to decline.
Palm oil output in Malaysia, the world's second-largest producer, last reported that production fell 1.4% from the previous month to 1.65 million tonnes in April.
Flat or rising stocks from April to May, however, could add to already high inventory levels, which have kept pressure on prices since the final quarter of last year.
Meanwhile, Malaysian palm oil shipments for May 1-20 rose between 5.6% and 13% compared with the same period last month, according to data from cargo surveyors Societe Generale de Surveillance, Intertek Testing Services and AmSpec Agri Malaysia.
In related oils, the Chicago July soybean oil contract rose 0.1% on Tuesday, while July soyoil on the Dalian Commodity Exchange was down 0.9%.
The Dalian May palm oil contract was trading flat at 1137 GMT.
Palm oil prices are affected by movements in other edible oils that compete in the global vegetable oils market. - Reuters