05/12/2007 (The Star Online), Petaling Jaya - Crude palm oil (CPO) prices yesterday dipped below RM2,900 a tonne for the first time in two months as a retreating crude oil price dented sentiment.

Traders said the market was also looking at the supply-demand situation in the vegetable oil market, on concerns that record high prices would limit demand from traditional buyers.

The benchmark third month CPO futures contract on Bursa Derivatives fell RM37 to close at RM2,889 yesterday, extending its decline to a third straight day.

Earlier, the contract clawed back some of its losses when buyers saw an opportunity to re-enter the market after prices fell from the Nov 28 intra-day record of RM3,068 a tonne.

“CPO came under pressure towards the end of the session as some investors decided to unwind their long positions, in line with the weakness in the crude oil market,” a trader noted.

The crude oil price in New York reversed its early advances yesterday – back to below US$89 per barrel – as the market awaited the output decision of major producing countries at a meeting in Abu Dhabi today.

According to a Bloomberg report, slightly more than half the 42 analysts surveyed expected the Organisation of Petroleum Exporting Countries to maintain oil production at current levels.

Meanwhile, the diminishing hostility between the United States and Iran was also capping further rises in the crude oil market.

Palm oil, mainly used for cooking, has been tracking the surge in crude oil in recent months largely due to its growing use as a feedstock for biodiesel.

The country’s golden crop, which is the cheapest among all edible oils, is also attracting new buyers as the rise in soybean oil price prompted more users to switch to palm oil.

But the sharp increase in recent months – the CPO price has jumped 47% year-to-date – might have also caused some buyers to limit their purchases.

Two cargo surveyors earlier this week estimated that Malaysia's palm oil exports declined marginally in November. The Malaysian Palm Oil Board statistics show palm oil exports fell 4.4% in October.