KUALA LUMPUR, July 18: Malaysia crude palm oil futures tumbled 2.2 per cent on Friday to a more than two month low, as softer crude oil prices dampened prospects for vegetable oil-based biofuels, which could curtail overall demand further.

Palm oil is struggling to hold onto gains of about 11 per cent made so far this year, due to faltering food and fuel demand, which have led inventory levels to balloon to record levels.

The benchmark October contract on the Bursa Malaysia Derivatives Exchange fell as much as 77 ringgit to 3,358 ringgit ($1,035) per ton, a level unseen since May 7, before settling down 43 ringgit at 3,392 ringgit.

Other traded months fell between 29 and 47 ringgit. Overall traded volumes shot up to 16,501 lots of 25 tons from the usual 10,000 lots.

Traders says the market is unlikely to recover soon unless there are clearer indications of a pick-up in Asian festival demand.

There will be no real gains until inventories start to deplete on the account of fresh buying from China, India and Pakistan, said another international trader.

But exports have been dismal so far, with cargo surveyor Societe Generale de Surveillance reporting a steeper fall of nearly 20 per cent to 485,181 tons.

But the most-active January 2009 soyoil contract on China's Dalian Commodity Exchange dropped dived nearly 3 per cent.

Indonesian palm oil eased on Friday, taking cues from an easing Malaysian market. The state marketing centre in Jakarta sold crude palm oil 8,877 rupiah ($0.970) a kg, down from 8,980 rupiah a kg on Thursday.

Producers in North Sumatra's Medan which is home to Belawan port, the country's key port for palm oil exports -- did not hold an auction on Friday as losses in Malaysia sapped trading interest. Sellers are not in the market because Malaysia fell today, said a dealer at a plantation firm in Medan.

In Jakarta, refiners offered refined, bleached, deodorised (RBD) palm olein used as cooking oil--at 9,075 rupiah a kg, falling from 9,100 rupiah a kg on Thursday.

In Malaysia's physical market, crude palm oil for July shipment in the southern region was quoted at 3,400/3,420 ringgit a ton. Trades were done between 3,390 and 3,420 ringgit.—Reuters