KUALA LUMPUR, July 23: Malaysian crude palm oil futures plummeted nearly 7 per cent to hit 8-month lows as profit-taking in crude oil swept through allied vegetable oil markets amid rising global inventory levels.

Most of the Chicago Board of Trade's soyaoil futures were down more than 2 per cent and China's Dalian soyaoil sharply fell.

But palm prices suffered the most with all gains wiped out this year due to a continuous stream of bearish news ranging from a delay in the launch of biodiesel mandates in Malaysia's domestic market to Jakarta cutting palm export taxes.

Funds have been unwinding in other vegetable oil markets and today, the focus is on palm oil, said S Paramalingam, executive director of Pelindung Bestari, a local commodities brokerage.

He added: Part of the sell-off was due to the realisation that demand for Ramazan has been overstated and overpriced because the build-up in stocks was immense.

Buyers in China, India and Middle Eastern nations tend to stock up at least two or three months before the Asian festival season begins in early September with the Muslim fasting month of Ramazan.

But demand has not quite kept up with higher production cycle, which has led to palm stocks surging to record levels above 2 million tons.

Indonesia has cut export taxes for palm oil products in August to bring them in line with international prices, the trade ministry said on Tuesday, a move which will see more demand shifting from Malaysia, traders said.

The Jakarta tax cut and comments from the higher ups that biodiesel is not feasible this year have added to the overall downside that was started by lower crude oil and soyaoil prices, along with high inventories of palm oil, said another trader.

The benchmark October contract on the Bursa Malaysia.—Reuters