KUALA LUMPUR, May 30: Malaysian crude palm oil futures dropped as much as 3.5 per cent on Friday to their lowest level in three weeks as traders guessed weaker crude oil prices could slow biodiesel demand for vegetable oils.

Palm oil, used as cooking oil and in products ranging from cosmetics to biofuels, has lost 22 per cent since hitting a record high of 4,486 ringgit a ton in March, as surging prices dampened demand.

It’s a good temporary correction for crude oil and the rest of the vegetable oils, said Fordyanto Widjaja, a Singapore-based analyst with Morgan Stanley.

Demand for palm oil traditionally slows in the second quarter as there is no festive demand in this period but it will certainly pick up, he added.

The benchmark August contract on the Bursa Malaysia Derivatives Exchange fell as much as 125 ringgit to 3,440 ringgit ($1,062) per ton, a level not seen since May 8.

Other traded months in Malaysian exchange ranged between a se of 36 ringgit to 88 ringgit declines. Overall volumes slipped to 8,484 lots of 25 tons each from the usual 10,000 lots.

The Argentine government on Thursday modified its controversial soy export tax system, which has sparked farm protests and a serious political crisis, but farm leaders said the changes did not go far enough.

Global vegetable oil markets often track crude oil because of the growing use of edible oils to make biodiesel, which competes with petroleum diesel.

In Malaysia’s cash market, crude palm oil for June shipment in the southern region was quoted at 3,500/3,520 ringgit. Trades were done at 3,520 ringgit.—Reuters