Malaysian crude palm oil futures closed up more than half a percent, recouping losses from the previous day as players moved to cover shorts after a pick-up in physical sales of oil.
Some dealers saw further gains, saying the market appeared to have touched a floor on whatever bearish news was expected for the week.
Others were cautious, saying weak prices of soyaoil after the second largest US soya crop forecast for this year might pressure palm oil in the near term.
The benchmark third-month crude palm oil contract on Bursar Malaysia Derivatives, November, ended up 10 ringgit at 1,387 ringgit ($368) a tonne after on Monday's seven-ringgit loss on bearish crop and export figures.
It was up just five ringgit. "We bought about 30,000 tonnes of olein in the physical markets of both Malaysia and Indonesia, and people began covering in futures after seeing that," said a trader at a large brokerage.
The broader futures market closed down one ringgit to up 11. Volume totalled 4,777 lots of 25 tonnes each, little changed from Monday's 4,813 lots.
The market can reach 6,000 lots or more on an active day. Soyaoil on the Chicago Board of Trade was down after on Monday's crop report by the US Department of Agriculture, although losses were light. September CBOT soyaoil was down 0.13 cents a lb. at 22.04 cents.
The back months were 0.09 to 0.23 lower. USDA projected the 2005 US soya crop at 2.856 billion bushels, above the government's August estimate for 2.791 billion and an average of analysts' estimates for 2.814 billion.
Dealers said on Tuesday that the fundamentals for palm oil were not too strong after a bearish supply-demand report for August and flat export numbers for September 1 to 10. The official Malaysian Palm Oil Board said output of palm oil grew 5.6 percent in August from July.
The market had been expecting growth of below 4 percent. MPOB said exports were up 8.31 percent, in line with market forecasts, but stocks jumped 4.72 percent, against expectations of about 3.7 percent.
Independent cargo surveyor Society General de Surveillance had indicated in a separate report that exports of palm oil for September 1 to 10 were almost unchanged from August 1 to 10.
In physical dealings of crude palm oil, September saw offers closing at 1,385 ringgit a tonne and bids at 1,380 in the southern region of Malaysia.
Offers for the central zone closed at 1,380 ringgit while bids wrapped at 1,370. Trades for the south were at 1,375-1,380 ringgit while the central region reported business at 1,365-1,372.50.
PALM OIL FUTURES:
September (south): 1385.
Open/High/Low: 1375/1389/1372.
Previous close: 1375.
PALM OIL PHYSICALS:
November (3rd month): 1387.
Previous settlement: 1377.
FUTURES:
Benchmark November closed up 10 ringgit at 1,387 ringgit ($368.00) a tonne on short covering after strong buying in physicals.
PHYSICALS: Offers for spot September also up 10 ringgit.