KUALA LUMPUR, July 29: Malaysian crude palm oil futures dropped as much as 4.7 per cent to seven-and-a-half month lows on Tuesday, slipping below a key resistance level of 3,000 ringgit on signs of rising stocks of the vegetable oil.

Palm oil, stricken in recent weeks by weakening crude oil prices and slow overseas demand, has wiped out all its gains for this year and is now down more than 3 per cent since the start of 2008.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell as much as 140 to 2,861 ringgit ($877) a ton, the lowest level since December 12, 2007. The contract then clawed back some losses to settle down 32 ringgit at 2,969 ringgit.

Even if exports were to gain some ground this month with start of the Asia festival demand, production in Malaysia is still going to be much higher, said a trader with a foreign brokerage.

Other traded months were 15 ringgit and 125 ringgit lower. Overall volume nearly doubled to 19,096 lots of 25 tons lots from 10,000 lots usually traded.

The Southeast Asian nation, along with Indonesia, is undergoing a high production cycle in recent months with analyst predicting bumper harvests till August.

And overseas demand is starting to trickle in, with buyers in China, India and Middle East nations usually stocking up at least two months before the Asian festival season begins in early September with the Muslim fasting month of Ramazan.

Palm oil producers in North Sumatra’s Medan--home to Belawan port which is the key port for palm oil exports--sold crude palm oil at 7,740-7,780 rupiah ($0.848-$0.929) a kg, falling about 5 per cent from 8,180 rupiah a kg last week.

Buyers are in the market but there aren’t too many sellers because prices are not attractive for them, said a dealer in a plantation firm in Medan.

Refiners in Jakarta offered RBD palm olein, used as cooking oil, at 8,400-8,500 rupiah a kg, down from 8,650 rupiah a kg on Monday.

Prices have fallen a lot but buyers are still not interested. They want to see if prices can fall further, said a dealer in a refiner in Jakarta.

Indonesia markets will be closed on Wednesday for a public holiday.

In Malaysia’s physical market, July and August crude palm oil was offered at 2,950/3,000 ringgit in the southern region.

Trades were done at 2,950-3,000 ringgit.—Reuters