KUALA LUMPUR - Malaysian palm oil futures edged lower on Wednesday, retreating further from sharp gains made earlier in the week as a firm ringgit and concerns over rising palm supplies stifled buying interest.
Benchmark prices on Monday rose above a 3-week top of 2,250 ringgit (S$840), partly fuelled by anticipation Indonesia was close to imposing levies on crude and processed palm oil exports, traders say.
The proposal will likely be approved this week, pending President Joko Widodo's signature.
"People jumped the gun. Some took advantage to try and push prices up," said one trader with a foreign commodities brokerage in Kuala Lumpur.
"These two days things cooled down a bit because there's no follow-through."
A firm Malaysian currency in which the palm feedstock is priced muted buying interest from overseas buyers.
The ringgit was trading at 3.6340 per dollar by 0530 GMT, stronger than a low of 3.7211 on March 30.
"The strong ringgit also put a dampener on things, because a week before the ringgit was much weaker," the trader added.
By the midday break, the benchmark June contract on the Bursa Malaysia Derivatives had edged down 0.8 per cent to 2,189 ringgit a tonne, with prices trading between 2,185 and 2,204 ringgit.
Total traded volume stood at 14,177 lots of 25 tonnes, more than the usual 12,500 lots.
The contract was also weighed by expectations of a strong recovery in Malaysia's crude palm oil production in March and April, after bouts of droughts and monsoon flooding in 2014 stressed trees and hindered fresh fruit growth.
A Reuters poll forecast output in the No.2 grower to surge 18 per cent in March from a month ago to 1.32 million tonnes - its first rise since August.
The pick up in output is expected to overtake export sales, and may lead to end-stocks increasing for the first time in four months to 1.75 million tonnes, the poll showed.
In other markets, oil prices fell more than a per cent on Wednesday as industry data showed a larger-than-expected weekly build in US stockpiles and as Saudi Arabia reported record output in March.
In other vegetable oil markets, the US soyoil May contract rose 0.1 early Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange lost 0.6 per cent.