KUALA LUMPUR: Malaysian palm oil futures reversed early gains on Wednesday after trading in a tight range, as traders weighed a forecast for a jump in June inventories against expectation for a recovery in July exports.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange slipped 1 ringgit, or 0.03%, to 3,882 ringgit ($835.92) a metric ton by the midday break.

Malaysia’s inventories likely stood at 1.86 million metric tons by the end of June, rising by about 10.5% higher from a month earlier, to stand at a four-month high amid sluggish exports, a Reuters survey showed.

Palm oil falls more than 2%, ending three-session rally

Production in June was forecast to fall 0.8% to 1.51 million tons, while exports likely gained 0.7% to 1.09 million tons, according to the survey.

“From a fundamental standpoint, the palm oil market still seems bearish due to the rising stock level and the high crop season,” Refinitiv Agriculture Research wrote in a note.

“However, shipments in July are expected to recover, given the widening palm oil discount against rival soft oils, the weak Ringgit and dwindling destination stocks supporting consumer buying,” it added.

Dalian’s most-active soyoil contract fell 0.8%, while its palm oil contract lost 1.4%. The Chicago Board of Trade was closed for a public holiday.

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

Russia on Tuesday restated a demand for its state agricultural bank to be reconnected to the global SWIFT payments system to avert the collapse of the Black Sea grain deal and said it would not accept a reported compromise proposal.

Palm oil may retest a resistance at 3,978 ringgit per metric ton, a break above which could lead to a gain into a range of 4,039-4,122 ringgit, Reuters technical analyst Wang Tao said.