KUALA LUMPUR, Dec 23 : Malaysian crude palm oil futures fell 3.6 per cent on Tuesday, extending midday losses as the market tracked declines in other vegetable oils and crude prices hovered below $40 a barrel.

Crude palm oil was one of the first commodities this year to feel the impact of the faltering world economy, tumbling 66 per cent from a March peak of 4,486 ringgit a ton.

Prices of palm oil could take a further beating as its use as a feedstock for biodiesel is less attractive with petroleum diesel retailing much cheaper, traders say.

The market came down because crude oil is back to around $39 and soybean oil has also fallen. But it was quiet. Many people are sidelined. There are probably more selling opportunities than buying ones,” a trader with a Malaysian commodities brokerage said.

Overall trade fell to 8,722 lots of 25 tons each from the usual 10,000 lots.

In Indonesia, the world’s largest palm producer, the Jakarta-based state marketing centre said it only sold 1,000 tons out of 3,500 tons of palm oil offered in an auction at 5,358 rupiah ($0.49) per kg, compared to 5,394 rupiah per kg on Monday.

The centre, which normally sells palm oil from state plantations, said that due to Christmas and year-end holidays it will not hold any more palm auctions this year. The next auction will be on Jan. 5, 2009.

Indonesia’s largest listed plantation firm PT Astra Agro Lestari also said it will not hold palm oil auctions from Dec. 25 to Jan. 2.

Producers in Medan -- home to Belawan port, Indonesia’s key port for palm oil exports -- sold palm oil at 5,340 rupiah per kg on Tuesday. They did not hold a palm oil auction on Monday.

Meanwhile, refiners in Jakarta sold refined, bleached, deodorised (RBD) palm oil, used as cooking oil, at about 5,850 rupiah per kg, compared to 5,750 rupiah per kg on Monday.

In Malaysia’s physical market, crude palm oil for both December and January shipment in the southern region saw bids and offers at 1,550/1,560 ringgit. Trades were done at 1,560 ringgit.—Reuters