KUALA LUMPUR, Nov 6: Malaysian crude palm oil futures slid 5.6 per cent on Thursday as commodity markets mostly drew back on worries of a deepening economic recession.

Crude oil fell below $65 a barrel, pulling down palm futures as well as China Dalian soyoil and Chicago soybean oil markets during Asian trading hours, underscoring fears that demand for vegetable-based biodiesel faltered.

The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell as much as 92 ringgit to 1,548 ringgit ($439.4) per ton. It clawed back some losses by the end of the session, ending down 41 ringgit at 1,599 ringgit.

Crude oil is the dampener and it’s giving some insight to the weakness in palm-biodiesel demand as energy prices go lower, said a trader with a foreign commodities broker.

Economic woes have taken centre stage again, pushing the US election result away.” Other traded months fell between 25 and 64 ringgit by the midday break Overall trade volume slipped to 8,881 lots at 25 tons each from the usual 10,000 lots.

Palm oil has fallen two-thirds from a peak of 4,486 ringgit in the past 9 months thanks to easing crude oil prices, tight credit, higher supplies and weak demand from China and India.

Inventory (Malaysian palm oil) remains persistently high because of weaker demand - we think demand will continue to weaken and there it will take longer for inventory to clear, UBS analysts Alain Lai and Felicia Tandiyono said in a research note.

Inventory needs to fall below 1.5 million tons from its current levels of 2 million tonnes before the crude palm oil price regains strength in our view. For UBS’s crude palm oil price forecasts and ratings of Malaysian planters. Malaysia’s October palm oil stocks likely rose 4.1 per cent to a near-record level of 2.03 million tons as production posted steady growth despite a major holiday season, outpacing a weak increase in exports, a Reuters poll showed on Thursday.

Shares of IOI Corp , Malaysia’s second largest planter, slid 4.9 per cent while KL Kepong tumbled 4.1 per cent. Singapore-listed Wilmar lost 4.9 per cent while Indonesia’s largest palm producer Astro Agra Lestari dived 3 per cent.

Oil fell below $65 a barrel on Thursday, extending a 7 per cent drop in the previous session, as heightened fears of a demand-crushing global recession weighed on sentiment. Other vegetable oils were mixed in Asian trade. US soyaoil for December delivery edged higher after falling sharply overnight but the most-active January 2009 soyaoil contract on the Dalian Commodity Exchange dived 3.9 per cent.—Reuters