KUALA LUMPUR: Malaysian palm oil futures fell to a five-week closing low on Tuesday, dragged by weakness in rival Dalian oils and concerns that a slowdown in demand would raise inventories.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange closed 106 ringgit, or 2.17%, lower to 4,789 ringgit ($1,151.76) a tonne, its lowest closing since Oct. 5.

The contract had earlier declined as much as 3.9%.

"Physical prices are holding strong but futures in Bursa Malaysia is coming down fast," a Kuala Lumpur-based trader said.

Weaker Dalian palm olein and overnight drop in soyoil prices, and concerns over lower Indian imports are weighing in, the trader added.

A typical low palm oil production cycle ahead will likely draw down stock levels but potential slower exports due to high prices, India edible oil duties, post-festive season and the upcoming winter season could keep inventories elevated, Refinitiv Agriculture Research said in a note.

Palm oil reverse early losses, higher global supply outlook weighs

"If key destinations slow down their purchases in the weeks ahead, we expect ending stocks build-up sooner, weighing on the palm market," Refinitiv wrote.

A higher-than-expected forecast of 1.7% rise in October production by the Malaysian Palm Oil Association on Monday have also stoked concerns that inventories may rise faster than previously estimated.

The Malaysian Palm Oil Board is scheduled to release official data on Wednesday.

Dalian's most-active soyoil contract fell 1.9%, while its palm oil contract slipped 1.8%. Soyoil prices on the Chicago Board of Trade were up 0.4%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.