Palm Oil Declines in Malaysia as Recession Curbs Demand Outlook

By Luzi Ann Javier

March 30 (Bloomberg) -- Palm oil futures in Malaysia dropped for a second day as crude oil fell on speculation demand for commodities will remain weak because of the recession.

Crude oil weakened in New York on concern global stockpiles may increase as the world economy slumps. Industrial production in Japan, the world’s third-largest oil consumer, fell for a fifth month in February, the longest losing streak since 2001, raising concerns the slump may be deepening.

“If people are under-forecasting the global downturn and it turns out to be worse, it will impact consumption of all commodities, including crude oil and to some extent palm oil,” said Ivy Ng at CIMB Research Sdn. in Kuala Lumpur.

Palm oil for June delivery, fell 0.2 percent to 1,987 ringgit ($545) a metric ton on the Malaysia Derivatives Exchange at the 12:30 p.m. break in Kuala Lumpur.

Crude oil for May delivery fell as much as $1.26, or 2.4 percent, to $51.12 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $51.35 at 12:06 p.m. Singapore time. Crude typically leads palm oil as the tropical commodity can be used to make biofuels.

The joint marketing office of Indonesia, the world’s biggest palm oil producer, said March 27 it failed to sell any of the 2,000 tons it had offered at a tender in Jakarta due to low bids.

To contact the reporter for this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net