KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Tuesday, rising for a second consecutive session on concerns that mill closures in the world’s second largest producer will hurt output, and tracking gains in rival Dalian oil.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange closed up 63 ringgit, or 1.28%, to 4,985 ringgit ($1,134.24) a tonne.

Palm had earlier declined nearly 3%.

The Southern Peninsula Palm Oil Millers’ Association estimated June 1-25 production to rise 17.19% from the previous month, traders said on Monday.

Some palm oil millers in Malaysia, the world’s second largest producer, have temporarily halted production following a dramatic plunge in prices of the edible oil this month, the Malaysian Palm Oil Millers Association told Reuters.

Palm slumps 15% for the week on rising output outlook, soy oil declines

Malaysian authorities urged millers to resume production and buy oil palm fruits from farmers, with the palm oil board studying possible action that could be taken against those who declined to resume.

Fitch Ratings expects higher global vegetable oil output to drive a decline in prices to below $1,000 a tonne in the second half of the year.

“We expect continued output growth in Indonesia to exert further pressure on prices,” it said in a note.

The recent interest rate hike by U.S. Federal Reserve and the return of Indonesia’s palm oil exports have sparked a steep price correction from record highs hit earlier in the year, Refinitiv Commodities Research said in a note.

Palm fundamentals are bearish and market sentiment is weak on expectations of recession and rising economic risks, but the downside is limited by a weak Malaysian Ringgit and huge palm price discounts to rival soybean oil, Refinitiv said.

Dalian’s most-active soyoil contract rose 2.8%, while its palm oil contract was up 4.7%. Soyoil prices on the Chicago Board of Trade gained 1.5%.