KUALA LUMPUR: Malaysian palm oil futures extended early gains on Wednesday, as the market shrugged off a plunge in August exports and focused on the outlook for tight supply in global edible oils due to hot weather in soybean producers South America and the US

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange closed up 62 ringgit, or 1.44%, at 4,365 ringgit ($1,038.79) a tonne. The contract has risen for three out of four sessions.

Malaysia’s exports during August 1-25 fell between 12% and 13% from the same period in July, cargo surveyors said.

The Malaysian Palm Oil Association’s (MPOA) recent estimates of a rise in August 1-20 production triggered a higher possibility of Malaysia’s production to return to its normal peak in the third quarter, a Singapore-based trader said.

“Better than expected palm oil production and weak exports is a recipe for a major sell off, but that is not happening nor going to happen in the near future,” said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari.

Prices are propped up by a “very tight” supply situation in top palm oil producer Indonesia and ambiguities with biodiesel mandates in the US, Paramalingam said.

“Thus any dip or correction is an opportunity to bargain hunt,” he added.

The US Environmental Protection Agency is expected to recommend to the White House reducing federal biofuel blending mandates for 2021 to below 2020 levels in what would be a blow to the biofuels industry, Reuters reported on Friday.

Soyoil prices on the Chicago Board of Trade were down 0.2%, after rising 3.4% in the previous session. Dalian’s most-active soyoil contract gained 2.1% and its palm oil contract rose 2.4%.

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