KUALA LUMPUR: Malaysian palm oil futures reversed early gains on Monday after China asked major state-run firms to stop purchases of US soyabeans as tensions between the two countries flare.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange closed down 12 ringgit, or 0.52%, to 2,280 ringgit ($528.39) a tonne.
China on Monday said Washington's attempts to harm Chinese interests will be met with firm countermeasures, after Washington said it would eliminate special US treatment for Hong Kong to punish Beijing.
"It is too early to say China's halt in US soyabeans purchases would benefit palm oil," a Kuala Lumpur-based trader said.
He added that falling soyaoil prices would hurt lower palm oil prices, while a narrowing spread between soyaoil-palm oil price could lead to palm losing its market share.
Palm oil had earlier climbed to an intraday high of 2.14%, touching its highest since April 9.
"The market was drawing strength from May export numbers and better export outlook in June given the start of 0% export tax," said Sathia Varqa, owner of Singapore-based Palm Oil Analytics.
Malaysia's exports rose between 7% and 8.4% in May from the month before, cargo surveyors said on Monday.
The world's biggest palm oil producers Indonesia and Malaysia have set export tax for crude palm oil at zero for June.
However, Indonesia will charge a blanket export levy of $55 per tonne on shipments from June 1 to raise funds for a domestic biodiesel programme.
Dalian's most-active soyaoil contract rose 1.07%, while its palm oil contract inched up 0.52%. Soyaoil prices on the Chicago Board of Trade were up 0.07%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.