Malaysian crude palm oil futures fell 2.2 percent to the lowest level in more than eight months on Monday as worries about a build-up in supply weighed on the market, dealers said. The benchmark October contract on the Bursa Malaysia Derivatives Exchange closed down 2.25 percent, or 69 ringgit, at 3,001 ringgit a tonne, the lowest since November 7, 2007.
Oil rose towards $124 a barrel on Monday, rebounding from a seven-week low, in what analysts said was technical buying and short-covering after recent declines left the market oversold. "Sentiment has stabilised temporarily but after this it will depend on crude oil," a trader said.
By midday, the benchmark October contract on the Bursa Malaysia Derivatives Exchange was up 2.6 percent, or 80 ringgit, at 3,150 ringgit ($969.8). Other traded months were between 55 ringgit and 87 ringgit higher. Overall volume was 3,284 25-tonne lots. The benchmark contract has fallen about 3 percent in the past week.
Commodities Minister Peter Chin was quoted on Sunday as saying the government would take urgent measures to counter the recent slide in international crude palm oil prices and ensure it does not become a long-term trend. Malaysia is the world's second-largest producer of crude palm oil.
Chin said the government would lower the current stock of crude palm oil in Malaysia by exporting it to countries, such as India, Pakistan, China and the Middle East, instead of exporting refined palm oil, while increasing exports in winter to western countries where it could be used as bio-fuel.
Other measures include increasing the usage of crude palm oil for bio-fuel production, encouraging local power producers to use crude palm oil as raw material, and having more industries use the commodity as feedstock fuel, instead of diesel, he said. In the physical market, July/August crude palm oil was bid at 3,170 ringgit in the southern region against offers at 3,180 ringgit. Traders were seen at 3,170 ringgit.