KUALA LUMPUR: Malaysian palm oil futures fell more than 3% on Wednesday, tracking weaker rival oils while expectations of rising production in top producing countries further pressured prices.

The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange declined 3.65% in intraday trade before settling down 96 ringgit, or 3.25%, at 2,861 ringgit ($689.07) a tonne, marking its third straight session of drop.

Palm oil prices have declined 7.1% so far this week amid worries fresh lockdowns in some European countries would hurt demand. However, the tropical oil has added about 4.5% so far this month, heading for a fifth straight monthly gain.

“Palm oil prices are trading lower on inevitable profit-taking from the recent rally and this should be seen as an adjustment for its spreads over competing oils and gas oil,” said Anilkumar Bagani, research head of Sunvin Group, a Mumbai-based vegetable oil broker.

A forecast from the Malaysian Palm Oil Association indicating output for the first 20 days of September rose 5% from a month earlier also pressured prices, traders said.

Output in top producer Indonesia is likely to increase 20% on-month in September, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari Sdn Bhd.

In top buyer India, demand is seen rising due to sharply lower import arrivals of sunflower oil this month and a higher price spread with palm, Bagani said.

Dalian’s most-active soyaoil contract fell 3.65%, while its palm oil contract fell 4.2%. Soyaoil prices on the Chicago Board of Trade were down 1.43%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market. Malaysia’s ringgit fell to a near two-week low after opposition leader Anwar Ibrahim claimed he had a majority in parliament to form a new government.—Reuters