The benchmark September contract on the Bursa Malaysia Derivatives exchange ended MYR11 higher at MYR2,301 a metric ton after tumbling to an intraday low of MYR2,277/ton, its lowest level since Nov. 13.
August crude oil on the New York Mercantile Exchange was trading 88 cents higher at $73.02/bbl on Globex at 1024 GMT.
Prices have been battered the past few weeks, declining 6.7% since June 1 due to worries about the strength of the global economic recovery, and bearish supply sentiment hadn't helped either as palm oil output is expected to rise in the second half.
Steady progress in India's monsoon rains, the main source of irrigation for its domestic crops, may boost its domestic output and "India probably won't have to step up purchases of vegetable oils significantly, which is bearish for palm prices," said a Malaysia-based broker.
Monsoon rains have covered the whole of India Tuesday, improving crop sowing prospects and easing worries about output and food inflation.
A more than two-week halt in the monsoon's progress raised concerns recently that the delay would hurt summer-sown crops for a second straight year.
"I don't expect palm prices to rise much in the next trading session as inventory levels in Malaysia and Indonesia have gone up," said a Singapore-based trading executive.
Plantation company executives and analysts said palm production is expected to rise during the July-September period and they expect a further dip in prices.
The fall in prices, however, raised hopes that palm olein could swing back to a discount over soyoil after trading at a premium the past two months over the rival oil.
Palm oil products have lost market share this year as soyoil prices tumbled on strong supply prospects from South American harvests. Palm olein was trading at a $20/ton premium to soyoil recently, compared with a discount of more than $100/ton in December.
In the cash market, palm olein for October/November/December was traded at $732.50/ton, free on board Malaysian ports, said a physical market broker based in Singapore.
Cash CPO for prompt shipment was offered unchanged at MYR2,400/ton
CME Group Inc.'s dollar-based CPO futures contract for September was offered $3 lower at $720/ton in Asia.
Rupiah-denominated September CPO futures on the Indonesia Commodity and Derivative Exchange were trading 0.6% lower at IDR6,215 a kilogram at 1026 GMT, with 141 lots done.
The October contract was trading 0.7% lower at IDR6,135/kg with 204 lots changing hands. One lot is equivalent to 10 tons.
Open interest on the BMD was 73,253 lots versus 72,771 lots Monday. One lot is equivalent to 25 tons.
A total of 14,104 lots of CPO were traded versus 11,214 lots Monday.
Closing BMD CPO futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Jul'10 2,397 2,380 Up 17 2,397 2,340 Aug'10 2,330 2,311 Up 19 2,336 2,308 Sep'10 2,301 2,290 Up 11 2,306 2,277 Oct'10 2,282 2,282 Unchanged 2,290 2,264 -By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; email@example.com