Malaysian palm oil futures fell 2 percent on Wednesday as easing prices for rival crude oil in Asian trade promoted players to book profits on palm oil's surge to record highs the day before. The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell as much as 54 ringgit, or 2 percent, at 2,713 ringgit ($803).
But it cut back on some losses to stand at 2,732 ringgit by 0750 GMT. Palm oil struck a record high of 2,791 ringgit on Tuesday, after surging 7 percent in a four-day winning streak. "When there is an absence of fresh leads, palm oil starts to crumble because players need to take some profit," said one trader.
"Crude oil has been very strong but it has been losing steam a little and this triggered off profit-taking." Oil prices eased on Wednesday after roaring to a new peak above $88, fuelled by renewed investor appetite triggered by fears of tighter supplies this winter and Middle East tension.
After surging more than 10 percent in six straight days of gains, US crude fell 19 cents to $87.42 a barrel. Palm oil often mirrors the movements in the crude oil markets because of its growing use in making biodiesel, which completes with petroleum diesel.
Traders said the palm oil market will not drop significantly as exports remain robust and crude oil stays above $80 per barrel. "Palm oil is still at a discount compared to crude oil and other vegetable oils, so demand is going to be strong," said one trader.
"Also, the festival season, especially in Asia, is going on so there is no looking back for palm oil. This is just a minor setback." Exports of Malaysian palm oil products for October 1-15 rose 6.4 percent to 671,741 tonnes on a month earlier, cargo surveyor Intertek Testing Services said. Another cargo surveyor, Societe Generale de Surveillance said exports for the same period rose 13 percent to 679,512 tonnes.
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