Palm Oil Drops a Fourth Day After Crude, Soybean Oil Decline

By Claire Leow

Dec. 3 (Bloomberg) -- Palm oil futures in Kuala Lumpur fell for a fourth day after crude oil slumped yesterday in New York, damping prospects for biofuels made from vegetable oils.

Crude fell to the lowest in more than three years on signs the U.S., the biggest energy user, is facing a more severe economic downturn than expected, having entered a recession in December 2007. Palm oil tracks oil as it’s viable as a biofuel if crude is more than $80 a barrel.

With concerns over demand weighing on palm oil, prices will only firm up “towards the seasonal production low” when supply concerns come to the fore, Ong Chee Ting, a plantation analyst at Aseambankers Malaysia Bhd. said in a report today.

Palm oil for February delivery fell as much as 2.1 percent to 1,569 ringgit a metric ton ($431) on the Malaysia Derivatives Exchange, a drop of 65 percent from a record in March. It dropped 1.6 percent to 1,577 ringgit at 11:08 a.m.

Malaysian production rose 4.6 percent to a record 1.65 million tons in October from September, lifting inventory to an all-time high of 2.09 million tons, the Malaysian Palm Oil Board said Nov. 10. Production typically peaks in July-September and November data due next week will be watched as an indicator of whether output has reached its high, analysts have said.

Crude oil for January delivery fell 4.7 percent to $46.96 a barrel in New York yesterday, the lowest settlement since May 20, 2005, for a 14-percent loss in two days. It rose to $47.58 at 11:16 a.m. Singapore time.

Rival soybean oil in Chicago dropped 2 percent yesterday, leaving palm oil 63 percent cheaper, Bloomberg data show. It was up 0.4 percent at 30.93 cents a pound at 11:17 a.m. Singapore time in after-hours trading.

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