JAKARTA, Sept 30: Malaysian crude palm oil futures sagged to an 18-month low on Tuesday, before recouping some losses in later trade, rattled by a tumble in crude oil prices on worries that an economic slowdown will curb demand, traders said.

The benchmark December contract plunged to as low as 1,988 ringgit ($578), its weakest since March 23, 2007, before recovering in afternoon trade on short-covering to finish at 2,090 ringgit a ton, still down 1.65 per cent on the day.

Palm oil, used to make products from soap to biodiesel, has fallen 31.48 per cent this year due to combination of abundant supplies, weaker crude oil and turmoil in financial markets.

Contracts of other traded months dropped between 14 ringgit and 100 ringgit. The overall volume stood at 20,233 lots of 25 tons each.

The trader said prices had already bottomed and would likely settle around current levels, unless crude oil dropped further.

NYMEX crude for November delivery settled down $10.52 at $96.37 on Monday on demand concerns after the US.

We just saw a technical bounce after plunging below 2,000 ringgit but overall the market sentiment remains on the weaker side, the head of palm oil futures trading at another Malaysian brokerage said.

The trader said there was also some profit-taking ahead of the holiday period.

The post holiday outlook is also gloomy as the fundamentals may not support a rebound in the market, amid weakening exports and as concerns of defaults may resurface.

If prices drop like that, I think the default thing may be brought up again, said the trader.

Exports of Malaysian palm oil products for September fell 18.8 per cent to 1,209,265 tons from 1,488,640 tons shipped in August, cargo surveyor Societe Generale de Surveillance said on Tuesday, beating traders’ expectations of a 14 to 15 per cent decline.

On an annual basis, exports in September have tumbled 14.6 per cent. September is generally a buoyant month for palm oil sales as top buyers such as India are still locking up supplies for the festival season starting in October.

In physical trade, Malaysian palm oil stood at 2,100/2,150 ringgit in both south and central region. Trades were done at 2,110 ringgit a ton in central region. There was no trade in south region.

In Indonesia, the world’s biggest palm oil producer, there will be no physical trade this week due to festivities to mark the Eid-ul-Fitr festivals.—Reuters