Palm Oil Price Falls to Two-Year Low as Crude Extends Decline

By Claire Leow

Oct. 15 (Bloomberg) -- Palm oil declined to the lowest in almost two years as crude oil fell for a second day on concern that a U.S government plan to invest $250 billion in banks won't be enough to spur economic growth.

Palm oil, used mainly for cooking, tracks crude as analysts consider it viable as biofuels when oil trades above $80 a barrel. Crude declined 0.8 percent to $78 a barrel in after-hours trading on the New York Mercantile Exchange at 11:42 a.m. Singapore time.

Palm oil for December delivery dropped as much as 6 percent, to 1,738 ringgit ($495) a metric ton on the Malaysian Derivatives Exchange and traded at 1,752 ringgit at 11:50 a.m. local time. Futures have plunged 61 percent from a record in March.

``If crude oil slides to $60 a barrel, crude palm oil would average 2,220 ringgit,'' said Ben Santoso, a plantation analyst at DBSVickers Securities Singapore.


Palm oil exports from Malaysia, the largest producer after Indonesia, fell 9.1 percent to 560,210 tons in the first 15 days of October compared with the same period in September, Intertek, an independent surveyor, said today. Exports fell 12 percent in September to 1.29 million tons, the first drop in three months, the Malaysian Palm Oil Board said Oct. 10.

Indonesia and Malaysia, which account for 90 percent of the world's palm oil production, this week proposed export measures to reduce inventory to support prices. Both countries, which are oil producers, also passed measures to introduce biofuels for domestic use to absorb surpluses.

Palm oil for January delivery in Dalian dropped the daily limit of 5 percent to 5,034 yuan ($784) a ton.

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