KUALA LUMPUR, July 4: Malaysian crude palm oil futures fell on Friday as soybean oil extended losses on China’s Dalian exchange, but the prospect of strong demand ahead of Asian festivals supported the market.

Soyabean oil prices on the Dalian Commodity Exchange fell more than one percent as a large grains trading firm liquidated contracts amid market talk that Beijing might release soybean reserves to stabilise food prices during the August Olympics, dealers said.

The benchmark September contract on the Bursa Malaysia Derivatives Exchange settled down 0.14 per cent, or 5 ringgit, to 3,630 ringgit ($1,112) a ton, after hitting intraday low of 3,614 ringgit.

Losses in the palm oil market are limited today as everyone is looking forward to good demand in July and August for festivals, said a dealer with a domestic plantation house.

Traders in Malaysia and Indonesia expect overseas demand from China, India and Middle Eastern countries to pick up in July, as buyers tend to stock up at least two months before the Asian festival season that begins early September.

Other traded months fell between 19 and 24 ringgit, except for current month July and distant December and January which rose marginally. The overall trade stood at 5,998 lots, around half of around 10,000 lots that change hands on a routine day.

The most-active January 2009 soyaoil contract on China’s Dalian exchange fell 1.03 per cent.

Dealers said soaring crude oil prices also supported palm oil, a feedstock for biofuels.

Oil was near $145 a barrel on Friday, close to record highs reached in the previous session when traders bought into the market ahead of a holiday weekend in the United States.

In Malaysia’s physical market, crude palm oil for July shipment in the southern region was quoted at 3,600/3,630 ringgit a ton. Trades were done at 3,620 ringgit a ton.—Reuters