Malaysian palm oil futures moved into positive territory on Monday evening, reversing losses as traders forecast declining monthly production in the world's second-largest producer. The market had fallen earlier in the session, tracking crude oil prices that fell more than 1 percent after the White House said that Saudi Arabia's leader had promised US President Donald Trump that Saudi oil production could be increased if needed.
Palm oil is affected by movements in crude oil because it is used to produce biodiesel. The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange was up 0.1 percent at 2,329 ringgit ($576.77) a tonne at the end of the trading day.
Trading volumes stood at 23,869 lots of 25 tonnes each on Monday evening. The rebound was because of an expected drop in output, one Kuala Lumpur trader said, adding that production should rise from July onwards.
Palm oil production is expected to remain flat or decline on harvesting disruptions as Malaysian planters contend with a post-holiday labour shortage. Malaysia's May output declined 2.1 percent to 1.53 million tonnes the previous month, government data shows.
Another trader had said that uncertainty remains for palm's longer-term outlook.
"U.S-China trade frictions have caused some pressure on palm. Exports are also poor," she said, adding that a weaker ringgit has offered some support.
Palm has been hovering near a two-year low in recent weeks but added 1.8 percent last week.
Malaysia's June exports of the edible oil were down 10.3 percent from the previous month, independent inspection company AmSpec Agri Malaysia said, while cargo surveyor Societe Generale de Surveillance put the fall at 11.8 percent.
A weaker ringgit supports palm because it makes the oil cheaper for holders of foreign currencies.
The ringgit, palm's traded currency, is trading at its weakest level since the start of the year. It was flat at 4.0380 against the dollar on Monday evening.
In related oils, the Chicago December soyabean oil contract rose 0.1 percent while September soyabean oil on China's Dalian Commodity Exchange edged up 0.3 percent.
The Dalian September palm oil contract was also up 0.3 percent.
Palm oil prices track the performance of other edible oils that compete in the global vegetable oils market.