The commodity fell as much as 2.5% earlier in the session to 2,134 ringgit, its weakest level since Aug. 8.
"Malaysian production numbers are looking good, we are hearing in Indonesia that is the case too," said a Kuala Lumpur based futures trader, referring to palm oil output in September.
Weaker related edible oils had also weighed on palm's prices earlier in the day, said traders.
Malaysian palm oil shipments during Sept. 1-20 fell between 3.9% and 10.8% from a month earlier, according to data from three cargo surveyors last week.
Output in Malaysia, the world's second largest producer, rose 4.6% in August from a month earlier to 1.82 million tonnes, its highest levels since November, according to data from the Malaysian Palm Oil Board earlier this month.
In other related oils, US soyaoil futures on the US Chicago Board of Trade were down 0.6%.
Chicago soyabean futures edged down on Tuesday, giving up some of the previous session's gains, although worries about wet weather ahead of US harvest curbed losses.
The January soyaoil contract on the Dalian exchange fell 1.2% and the Dalian January palm oil contract declined 1.9%. Palm oil prices are affected by movements in related oils, as they compete for a share in the global vegetable oils market.