Malaysian palm oil slipped on Tuesday, giving up some of last session's gains and falling for a fifth day out of seven on demand worries and position squaring ahead of the long weekend. The market is also bracing for an increase in palm oil production in the coming months as floods in December and January have left ample soil moisture for yields to rise.
"I think it is position squaring before the long weekend," said one Kuala Lumpur-based trader.
"Crude palm oil export tax is zero for March but the big question is how demand is going to be as China has been quiet and India has been taking hand to mouth."
The benchmark May contract fell 0.4 percent, or 8 ringgit, to 2,304 ringgit ($642) per tonne by the midday break. Total traded volume stood at 13,288 lots of 25 tonnes, close to the usual 12,500 lots.
The market gained 1.2 percent on Monday after Malaysia said it will keep tax on crude palm oil exports at zero for March, boosting hopes of higher demand.
But exports of Malaysian palm oil products for February 1-15 fell 4.9 percent to 508,955 tonnes from 535,651 tonnes shipped during January 1-15, cargo surveyor Intertek Testing Services said on Monday.
This decline came despite a zero tax on crude palm oil exports since October.
Malaysian palm oil futures trading will be closed on Thursday and Friday for the Lunar New Year break.
Palm oil remains neutral in a range of 2,261-2,357 ringgit, and an escape will point to a direction, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.
Brent crude extended its rally on Tuesday, moving further away from six-year lows hit in January, but some analysts warned that prices had risen too far and could face a correction.
Palm oil often takes its direction from the energy market for increasing use of vegetable oils in making renewable fuels that compete with petroleum products.