JAKARTA: Malaysian palm oil futures on Thursday posted its biggest drop in over three weeks after U.S. soyoil turned negative, while concerns about high supply and lockdown in China lingered.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange fell 4.01% to 3,542 ringgit ($787.29) a tonne by the end of the afternoon trade.

It fell as much as 5.66% earlier in the session, hitting its lowest intraday level since late June 2021.

Malaysian palm’s tracked Chicago Board of Trade (CBOT) soy prices that turned negative, while a break below a psychological level of 3,600 ringgit of the palm oil benchmark triggered further sell off, a trader in Kuala Lumpur said.

CBOT Soyoil prices lost 1.15% after having gained as much as 0.66% earlier in the day. Meanwhile, Dalian’s most-active soyoil contract fell 2.54%, while its palm oil contract dropped 2.38%.

Palm oil is affected by related oils as they compete in global vegetable oil market.

Palm slips to six-week closing low on higher supplies outlook, weaker rival oils

Meanwhile, markets were watching out the COVID-19 situation in China as lockdowns were seen hurting palm oil demand while Malaysian supply is expected to increase, other trader said.

To contain Omicron variant, China is imposing various degrees of lockdowns in cities to stop its spread. Chengdu, the capital of the southwestern Chinese province of Sichuan, extended a lockdown in most of its districts.

A Reuters poll ahead of Malaysian Palm Oil Board data pegged a jump in inventories to 2.03 million tonnes.