Malaysian palm oil futures inched up on Tuesday on tightening global oilseed supply, although gains were limited as weaker exports and soaring Spanish borrowing costs weighed on sentiment.
Malaysian palm oil stocks dropped below the 2-million-tonne mark for the first time this year, reinforcing views of a tight global supply amid a lower soy crop in drought-hit South America.
But concerns of a slowing commodity demand also surfaced with Spain's surging borrowing costs stoking investor nervousness over euro zone debt woes and weaker global economic growth.
"Negative macroeconomic factors coupled with weaker export numbers may force traders to take profits.
But fundamentally supply for crude palm oil and other vegetable oil is still very tight, so that should be supportive throughout the second quarter," said Alan Lim, research analyst with Kenanga Investment Bank in Malaysia.
At closing, benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange gained a 0.5 percent at 3,503 ringgit ($1,143) per tonne.
Traded volumes stood at 32,201 lots of 25 tonnes each, higher than the usual 25,000 lots.
According to technical charts, a bearish target of 3,401 ringgit per tonne will only be confirmed if palm oil drops below 3,454 ringgit, Reuters market analyst Wang Tao said.
Malaysia's palm oil stocks for March fell to a seven-month low at 1.96 million tonnes, beating market estimates, forcing traders to ramp up crude palm oil purchases in fear of a potential shortfall.
Malaysian palm oil exports fell by close to 15 percent for the first half of April from a month ago, according to cargo surveyor data.
Exports for refined products suffered declines as orders shifted to top producer Indonesia, which enjoyed a favourable tax structure.
In other vegetable oil markets, the most active US soyoil contract for May gained 0.7 percent, tracking healthy Chinese demand for soybeans, while the most active Dalian soyoil September contract also edged up 0.2 percent.