KUALA LUMPUR, July 17: Malaysian crude palm oil futures fell nearly 1 per cent on Thursday as worries about sluggish overseas demand weighed on the market.

Palm oil, used in products from soaps to biofuel, is trading about 23 per cent below a record high hit in early March of 4,486 ringgit a ton on the back of record inventory levels that are bound to increase further in July, traders said.

But red-hot crude oil prices have kept the vegetable oil about 13 per cent higher than the start of the year due to its use in alternative fuels.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange settled down 31 ringgit to 3,435 ringgit ($1,063) per ton.

The market is still under selling pressure because exports in the first half of July have not shown signs of improvement, said a dealer at a foreign brokerage firm.

Other traded months fell between 14 and 58 ringgit. Overall traded volumes rose at 12,677 lots of 25 tons from the usual 10,000 lots.

But traders still believe exports will pick up ahead the festive season in October,” the dealer said.

But exports have been dismal so far. Cargo surveyor Intertek Testing Services reported exports of Malaysian palm oil products for July 1-15 fell 7.8 per cent to 515,266 tons from previous month Societe Generale de Surveillance reported a steeper fall of nearly 20 per cent to 485,181 tons.

August soyaoil at the Chicago Board of Trade fell 0.7 per cent on profit-taking, erasing gains made overnight.

Traders expect export tax for shipment in August will be lower. It offers support to the market although Malaysia dropped sharply today, said an auction official in the centre that sells crude palm oil from state plantations.

The official also said traders expect the government to cut export tax to 15 per cent in August, from 20 per cent in July.

Producers in North Sumatra’s Medan which is home to Belawan port, the country’s key port for palm oil exports -- sold crude palm oil at 8,920 rupiah a kg, down from 9,050-9,070 rupiah a kg on Tuesday. Producers did not hold any auction on Wednesday.

In Malaysia’s physical market, crude palm oil for July shipment in the southern region was quoted at 3,445/3,450 ringgit a ton. Trades were done between 3,435 and 3,445 ringgit.—Reuters