03.07.2018 (DAWN.com ) - KUALA LUMPUR: 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 per cent after the White House said that Saudi Arabia’s leader had promised U.S. 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 0.1pc 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 2.1pc to 1.53 million tonnes the previous month, government data shows.

Another trader had said that uncertainty remains for palm’s longer-term outlook. “US-China trade frictions have caused some pressure on palm. Exports are also poor,” she said.

Palm has been hovering near a two-year low in recent weeks but added 1.8pc last week. Malaysia’s June exports of the edible oil were down 10.3pc from the previous month, independent inspection company AmSpec Agri Malaysia said, while cargo surveyor Societe Generale de Surveillance put the fall at 11.8pc.