KUALA LUMPUR: Malaysian palm oil futures recouped early losses on Friday, but were set for their biggest weekly drop in more than four months as markets tracked weakness in rival edible oils.

The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange gained 7 ringgit, or 0.2%, to 3,576 ringgit ($808.32) a tonne by the midday break, after six straight sessions of losses.

Earlier in the day, the contract hit its lowest level since Oct. 4.

The contract has fallen 8.8% so far in the week, heading for its biggest weekly drop since the week ended Nov. 18.

The sell-off in soybean oil, sunflower and rapeseed oils is putting pressure on palm oil prices, although estimates of lower production and end-stocks lent some support to the market, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

Palm oil may drop to 3,420 ringgit

“Palm oil prices have decoupled from fundamentals due to the overall global selling,” Paramalingam said.

“It is extremely difficult to pinpoint when exactly the price recovery will occur, we need better overall demand to make that possible.”

Dalian’s most-active soyoil contract fell 1.5%, while its palm oil contract eased 1.1%. Soyoil prices on the Chicago Board of Trade were up 0.6%. Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

Malaysia maintained its April export tax for crude palm oil at 8% and raised its reference price, a circular on the Malaysian Palm Oil Board website showed on Thursday.

Oil prices fell on worries about potential oversupply after US Energy Secretary Jennifer Granholm said refilling the country’s Strategic Petroleum Reserve may take several years. Lower oil prices make palm oil a less attractive option as biodiesel feedstock.

Palm oil may drop to 3,420 ringgit per tonne, as suggested by a projection analysis, Reuters technical analyst Wang Tao said.