15/03/2011 (The News International) - Malaysian palm oil futures reversed earlier gains on Monday, falling to a three and a half month low as investors sought safe-haven assets after last week’s earthquake in Japan, and easing unrest in the Middle Eastweighed on crude oil.

The benchmark May 2011 crude palm oil contract on Bursa Malaysia Derivatives fell 2.2 percent to 3,290 Malaysian ringgit ($1,082) a tonne after going as high as 3,340 ringgit earlier, and hitting an intraday trough of 3,281 ringgit , its lowest level since Nov. 29.

“There has been a lot of downward pressure on commodities,” said one palm oil analyst. “There is the idea of demand destruction from Japan. Fundamentally it won’t have too much of an impact on palm oil it is (more) a knee-jerk reaction on how you position your portfolio on the back of what happened in Japan.”

Palm oil prices slipped to a two week low on Friday and notched its worst weekly loss in more than two years after a massive earthquake hit Japan last week. On Monday, Japan battled to avert a nuclear catastrophe and to care for millions of people without power or water in its worst crisis since World War Two following Friday’s earthquake, which is feared to have killed more than 10,000 people.

“Market sentiment is following the disaster in Japan,” said a trader. “Palm oil is just joining the commodities crowd.”“All disasters, like the Libyan conflict, the immediate reaction is on the downward side,” he added. “Some feel you should buy on the dips, before the market returns to the good fundamentals.” Overall, traded volume stood at 7,829 lots of 25 tonnes each, compared with a total of 21,734 lots on Friday.