KUALA LUMPUR, Sept 23: Malaysian crude palm oil futures fell as much 2.9 per cent on Tuesday, erasing some of the week’s gains as weaker crude oil prices spilled over to vegetable oil amid fears of slowing overseas demand.

The vegetable oil is now trading at less than half of its record levels, battered by bumper harvests, defaults by Asian consumers and financial market turmoil.

The benchmark December contract on the Bursa Malaysia Derivatives Exchange settled down 39 ringgit at 2,305 ringgit ($676) per ton after falling to an inter-session low of 2,277 ringgit.

In the midday session, the contract rose 2,404 ringgit, a level not seen since Sept. 9.

The market was in for a correction given the moves in crude oil, said a trader with a local commodities brokerage. Export prospects look bad but we are not out of the bullish phase as production this month looks weaker.

Some traders say production is expected to fall by as much as 10 per cent as Indonesian plantation workers head home for the Muslim festival of Eid-ul-fitr in late September or early October, to mark the end of a month-long fasting period.

Other traded months rose between 3 and 63 ringgit.

Overall trade surged to 17,746 lots of 25 tons each from the usual 10,000 lots.

The state marketing centre in Jakarta sold crude palm oil at 6,136 rupiah ($0.659) a kg, up from 5,704 rupiah on Monday.

The market has gone up a lot in the past days and helped in lifting local prices, said a dealer in Medan.

Some producers have halted shipments as roads will close a week before and after Eid-ul-fitr to make way for holiday rush.

Oil tanks are not allowed to deliver palm oil to storage facilities in Belawan port and Dumai port in Riau, southern Sumatra starting September 26, the dealer said.

In Jakarta, refiners offered RBD palm olein, which is used in cooking oil, at 6,750 rupiah a kg, up from 6,350-6,500 rupiah a kg on Monday.

In Malaysia’s physical market, crude palm oil for September shipment in the southern region was 2,340/2,420 ringgit. Trades were done between 2,340 and 2,400 ringgit.—Reuters