More News • Gold Advances From Two-Month Low in Asia As Weaker Dollar Spurs Rebound • Oil Rebounds From Seven-Week Low as Longest Drop This Year D

By Claire Leow

July 9 (Bloomberg) -- Palm oil futures gained for the first time in four days on speculation that an 8 percent drop in the previous three days was excessive and may lure buyers.

The futures slipped below 2,000 ringgit ($559) yesterday for the first time since March 31 on concern a seasonal increase in production in the second half would swell stockpiles and after soybeans, crushed to produce a rival edible oil, dropped to the lowest in more than three months.

“While we are of the view that prices are not likely to turn around in a significant manner from current levels over the next few months, we believe that the 2,000 ringgit a ton mark is a good fundamental support level,” a report by RHB Research Institute Sdn. analyst Hoe Lee Leng said today.

Palm oil for September delivery on the Malaysia Derivatives Exchange gained as much as 1.8 percent to 2,037 ringgit a metric ton after earlier touching 2,000 ringgit. The contract paused at 2,022 ringgit at the 12:30 p.m. break in trading.

Prices won’t “fall substantially below” 2,000 ringgit in the short term, the RHB Research report said.

Palm oil for January delivery in Dalian rose for the first time in six days, advancing 0.4 percent to 5,566 yuan ($815) a ton at the 11:30 a.m. trading break. China is the biggest consumer of edible oils and the largest importer of palm oil.

Oil crushed from soybeans competes with palm oil as the two are used in applications including cooking and biofuel. Soybean oil is trading at a premium of about 30 percent to palm oil, according to Bloomberg data.

Soybeans Gain

Soybeans for November delivery on the Chicago Board of Trade rose as much as 1.8 percent to $9.0775 a bushel. Soybean oil for December delivery rallied as much as 2 percent to 33.56 cents a pound in Asian trading and was at 33.25 cents at 12:57 p.m. Singapore time.

Indonesia and Malaysia, which account for about 90 percent of palm oil production, have forecast record output this year. More than half the annual output in the countries is usually produced in the second half.

Stockpiles in Malaysia gained for the first time in six months in May as production climbed 8.5 percent, the biggest month-on-month increase in a year, the Malaysian Palm Oil Board said on June 10. It will announce June data tomorrow.

To contact the reporters for this story: Claire Leow in Singapore at cleow@bloomberg.net