A demand uptick ahead of the Muslim Ramadan festival had helped boost palm oil exports by 5-7 percent for June as buyers such as India, Pakistan and the Middle East stocked up on the tropical oil.
Market participants are awaiting data due next week from industry regulator Malaysian Palm Oil Board (MPOB) on June's stockpiles and production levels. Analysts and traders expect end-stocks to ease further from the current 1.82 million tonnes.
"Investors are waiting for the MPOB data. Stocks in June could draw down about 100,000 tonnes to 1.68-1.72 million tonnes," said a Kuala Lumpur-based trader with a foreign commodities brokerage.
But concerns remained that robust exports might not hold for long. Demand could dwindle on volatile economic conditions in the world's top two consumers, China and India, while tropical palm moves into a season of rising output in the second half of 2013.
"Palm oil looks bearish in the long term because production is starting to move into its peak season from July onwards. Maybe in the first week of July there could be good exports, but it should taper off after Ramadan," the Kuala Lumpur trader added.
The benchmark September contract on the Bursa Malaysia Derivatives Exchange edged 0.2 percent lower to close at 2,339 ringgit ($738) per tonne. Prices earlier fell to an intraday low at 2,324 ringgit, the lowest since May 21.
Total traded volumes stood at 35,891 lots of 25 tonnes each, in line with the average 35,000 lots.
The recent haze that choked Malaysia and Singapore has put planters under scrutiny and raised calls to cut reliance on unsustainable palm oil, which could add pressure on prices.
Food manufacturers have been urged to replace the tropical oil, an ingredient used in biscuits, chocolate and ice-cream, with other edible oils such as sunflower, corn and canola, Phillips Futures said in a note on Tuesday.
"We would not expect a significant dip in palm oil demand brought about by this initiative. However, if the substitution of palm oil were to take place over a transitional phase, we could expect future demand for palm oil to be adversely affected," the Singapore-based broker said.
CME Group cleared the first trade of its newly launched palm oil swaps <0#4CPC:> on June 21, done between Gunvor Group and Louis Dreyfus Commodities, the exchange said on Tuesday. It added that open interest for the swaps have crossed the 1,000-lot mark since the launch on June 3.
In other markets, Brent oil rose above $103 a barrel on Tuesday, up for a second day due to concerns about supply disruptions in the Middle East and Africa and a slightly improved economic outlook.
In vegetable oil markets, U.S. soyoil for December was flat in late Asian trade. The most-active January soybean oil contract on the Dalian Commodities Exchange ended almost unchanged.
Palm, soy and crude oil prices at 1006 GMT
Contract Month Last Change Low High Volume
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MY PALM OIL JUL3 2334 -3.00 2334 2365 90
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MY PALM OIL AUG3 2341 -5.00 2328 2364 3349
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MY PALM OIL SEP3 2339 -4.00 2324 2362 18865
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CHINA PALM OLEIN JAN4 5898 +4.00 5862 5930 348176
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CHINA SOYOIL JAN4 7360 +2.00 7324 7430 776510
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CBOT SOY OIL DEC3 45.68 +0.00 45.60 45.96 6697
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NYMEX CRUDE AUG3 98.16 +0.17 97.78 98.36 21329
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