KUALA LUMPUR: Malaysian palm oil futures reversed early losses to make gains in the second half of trade, supported by forecasts of declining production which could dent local stock levels, traders said.
The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange was up 0.2 percent at 2,508 ringgit ($583.80) a tonne at the trading close.
The market fell early, tracking a weaker performance in related oils on China's Dalian Commodity Exchange, before reversing to hit an intraday high of 2,511 ringgit, its highest since June 19.
Traded volumes stood at 40,868 lots of 25 tonnes each.
"Production is not picking up as much as initially thought," said a trader from Kuala Lumpur, referring to the market's expectations for June output which is scheduled to be reported on July 10 by the Malaysian Palm Oil Board.
"If production falls, it's likely stockpiles will fall too."
Declining end-stocks will help prop up benchmark palm oil prices, which dived 7.1 percent on-quarter in the April-June period. They are expected to decline further in the third quarter as production may rise in line with seasonal trend.
Demand is seen remaining weak until the next major festival of Diwali in October.
There is generally an increase in the sale of palm oil a month ahead of the Hindu religious event, as buyers stock up ahead of festivities for cooking purposes.
In other related edible oils, the September soybean oil on the Dalian Commodity Exchange and September palm olein were both trading flat at around 1200 GMT.
The soyoil market on the Chicago Board of Trade is closed for the US Independence Day holiday.
Palm oil prices are affected by moves in related edible oils as they compete for a share in the global edible oils market.
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